DORMANT COMPANY

(A). Dormant Company [Section 455]:

(1) Where a company is formed and registered under this Act for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may make an application to the Registrar in such manner as may be prescribed for obtaining the status of a dormant company.

Explanation.—For the purposes of this section,—

(i)  “inactive company” means a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years;

(ii) “significant accounting transaction” means any transaction other than—

(a) payment of fees by a company to the Registrar;

(b) payments made by it to fulfil the requirements of this Act or any other law;

(c) allotment of shares to fulfil the requirements of this Act; and

(d) payments for maintenance of its office and records.

(2) The Registrar on consideration of the application shall allow the status of a dormant company to the applicant and issue a certificate in such form as may be prescribed to that effect.

(3) The Registrar shall maintain a register of dormant companies in such form as may be prescribed.

(4) In case of a company which has not filed financial statements or annual returns for two financial years consecutively, the Registrar shall issue a notice to that company and enter the name of such company in the register maintained for dormant companies.

(5) A dormant company shall have such minimum number of directors, file such documents and pay such annual fee as may be prescribed to the Registrar to retain its dormant status in the register and may become an active company on an application made in this behalf accompanied by such documents and fee as may be prescribed.

(6) The Registrar shall strike off the name of a dormant company from the register of dormant companies, which has failed to comply with the requirements of this section.

For instance, ABC Electronics Limited incorporated a company ABC Telecommunications Limited with 60% shareholding on 1^st April 2013. It acquired telecommunication licence for a period of 15 years at a fee of Rs. 10 Crores from the Government of India on 30^th April, 2013 but considering the huge cost and time involved in building infrastructure the BOD have decided to commence its telecom operations w.e.f. 1^st April, 2017. The only expenses to be incurred during this gestation period would be amortisation of telecommunication licence fees and payment towards sitting fees of directors. In such a case the BOD of ABC Telecommunications Limited can obtain dormant status from ROC till the commencement of telecom operations, in accordance with the procedure described in the succeeding paragraphs

(B). COMPANIES (MISCELLANEOUS) RULES, 2014 VIS-À-VIS DORMANT COMPANIES:

1. Register of dormant companies

Rule 5. The Register maintained under the portal maintained by the Ministry of Corporate Affairs on its web-sitewww.mca.gov.in or any other website notified by the Central Government, shall be the register for dormant companies.

2. Return of dormant companies

Rule 7. A dormant company shall file a “Return of Dormant Company” annually, inter alia, indicating financial position duly audited by a chartered accountant in practice in Form MSC-3 along with such annual fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 within a period of thirty days from the end of each financial year:

Provided that the company shall continue to file the return or returns of allotment and change in directors in the manner and within the time specified in the Act. whenever the company allots any security to any person or there is any change in the directors of the company.

3. Certificate of status of dormant company

Rule 4. The Registrar shall, after considering the application filed in Form MSC-1. issue a certificate in Form MSC-2 allowing the status of a Dormant Company to the applicant.

4. Minimum number of directors for dormant company

Rule 6. A dormant company shall have a minimum number of three directors in case of a public company, two directors in case of a private company and one director in case of a One Person Company:

Provided that the provisions of the Act in relation to the rotation or auditors shall not apply on dormant companies.

5. Application for obtaining status of dormant company

Rule 3. For the purposes of sub-section (1) of section 455, a company may make an application in Form MSC-1 along with such fee as provided in the Companies (Registration Offices and Fees) Rules. 2014 to the Registrar for obtaining the status of a Dormant Company m accordance with the provisions of section 455 after passing a special resolution to this effect in the general meeting of the company or after issuing a notice to all the shareholders of the company for this purpose and obtaining consent of at least 3/4th shareholders (in value):

Provided that a company shall be eligible to apply under this rule only, if—

(i) no inspection inquiry or investigation has been ordered or taken up or curried out against the company;

(ii) no prosecution has been initiated and pending against the company under any law;

(iii) the company is neither having any public deposits which are outstanding nor the company is in default in payment thereof or interest thereon;

(iv) the company is not having any outstanding loan, whether secured or unsecured:  Provided that if there is any outstanding unsecured loan, the company may apply under this rule after obtaining concurrence of the lender and enclosing the same with Form MSC-1 ;

(v) there is no dispute in the management or ownership of the company and a certificate in this regard is enclosed with Form MSC-1;

(vi) the company does not have any outstanding statutory taxes, dues, duties etc. payable to the Central Government or any State Government or local authorities etc.;

(vii) the company has not defaulted in the payment of workmen’s dues;

(viii) the securities of the company are not listed on any stock exchange within or outside India.

(C). FINANCIAL STATEMENTS FOR DORMANT COMPANIES

Financial statements have to be prepared as per format stated in Schedule III which is in line with Schedule VI. The major change in financial statements includes – cash flow statement and statement of changes in equity. Cash flow statement is part of financial statements for all companies except one-person-company, small-company and dormant-company [Section 2(40)]. Cash flow statement needs to be prepared as per AS 3, i.e., direct method or indirect method, but for listed companies indirect-method is to be followed. Statement of changes in equity is included keeping in view applicability of Ind-AS when notified. Expenditure on CSR has to be shown as a separate line item in profit and loss account.

(D). MEETINGS OF BOARD

A One Person Company, small company and dormant company shall be deemed to have complied with the provisions of this section if at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days [Section 173(5)]

(E). APPROVAL OF FINANCIAL STATEMENTS BY BOARD OF DIRECTORS

Sub-section (1) of section 134 of the Act provides that the financial statement, including consolidated financial statement, if any, shall be approved by the Board of Directors before they are signed on behalf of the Board.

The following points may be noted:

♦		Approval cannot be by circular resolution of the Board.
♦		Approval has to be at Board Meeting in terms of section 179(3) (g) of the 2013 Act.
♦		Approval of accounts shall not be dealt with in any Board meeting held through video conferencing or other audio-visual means.

(F). CIRCULATION OF FINANCIAL STATEMENTS

Sub-section (7) of section 134 provides that a signed copy of every financial statement, including consolidated financial statement, if any, shall be issued, circulated or published along with a copy each of—

(a)		any notes annexed to or forming part of such financial statement;
(b)		the auditor’s report; and
(c)		the Board’s report referred to in sub-section (3).

(G). PERSONS ENTITLED TO COPIES OF FINANCIAL STATEMENTS

Section 136(1) of the Act provides that a copy of the financial statements, including consolidated financial statements, if any, auditor’s report and every other document required by law to be annexed or attached to the financial statements, which are to be laid before a company in its general meeting, shall be sent to:

♦		every member of the company,
♦		every trustee for the debenture-holder of any debentures issued by the company, and
♦		all persons other than such member or trustee, being the person so entitled,

not less than 21 days before the date of the meeting.

(H). FILING OF FINANCIAL STATEMENT WITH REGISTRAR

The company is required to file with the concerned Registrar of Companies the financial statement including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements in the Form AOC-4 with prescribed fees within 30 days from the date on which the financial statement were laid before a company at an annual general meeting. [Section 137(2)]

A company shall, along with its financial statements to be filed with the Registrar, attach the accounts of its subsidiaries which have been incorporated outside India and which have not established their place of business in India.

If an annual general meeting of a company is not held even then the financial statement along with the documents required to be attached shall be filed with the Registrar within thirty days of the last date before which the annual general meeting should have been held along with a statement for stating reasons for not holding AGM with the prescribed fees. [Section 137(2)]

(I). ANNUAL GENERAL MEETING

Pursuant to the provisions of section 96, every company other than a One Person Company, whether public or private, incorporated under the provisions of the Companies Act, 2013 shall hold during every year a general meeting of members, which shall be called ‘Annual General Meeting’. It is mandatory on every company to hold an annual general meeting in every calendar year. Year means calendar year.

The fact that the company did not function is no excuse for not convening an annual general meeting. [Madan Gopal Dev v West Bengal (1969) 39 Comp Cas 119: AIR 1968 Cal 79]

A new company which is registered under the Act other than a one person company, shall hold its first annual general meeting latest within a period of nine months from the date of closing of the first financial year of the company. Not more than 15 months shall elapse between the date of one annual general meeting of a company and that of the next [Section 96(1)]. If the first annual general meeting is so held, it is not necessary for the company to hold another annual general meeting in the year of its incorporation. The subsequent annual general meetings shall be held within a period of six months from the date of closing of the financial year.

(J). ANNUAL RETURN

Section 92(1) read with Rule 11 of the Companies (Management and Administration) Rules, 2014 provides that every company shall prepare a return (hereinafter referred to as the annual return) in the prescribed Form MGT-7 containing the prescribed particulars as they stood on the close of the financial year.

Section 92(4) provides that every company shall file with the Registrar a copy of the annual return, within sixty days from the date on which the annual general meeting is held or where no annual general meeting is held in any year within sixty days from the date on which the annual general meeting should have been held together with the statement specifying the reasons for not holding the annual general meeting, with such fees or additional fees as prescribed in the Companies (Registration Offices and Fees) Rules, 2014. [Rule 12(2)]

Section 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014 states that an extract of the annual return to be attached with the Board’s Report shall be in Form MGT-9.

1. Signing of annual returns

(a) The annual return shall be signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice.

(b) In relation to One Person Company and small company, the annual return shall be signed by the company secretary, or where there is no company secretary, by the director of the company.

2. Certification of annual returns in case of listed company

(a) The annual return, filed by a listed company or, by a company having paid-up share capital of Rs. 10 crore or more and turnover of Rs. 50 crore rupees or more, shall be certified by a Company Secretary in practice. The certificate shall be in Form MGT-8. [Rule 11(2)]

(b) The certificate shall state that the annual return discloses the facts correctly and adequately and that the company has complied with all the provisions of this Companies Act.

NEW BATCH FOR CS FOUNDATION/EXECUTIVE/PROFESSIONAL

Updates

1) CBDT restricts issue of Manual Refunds by Assessing Officers. Notification F.No. DGIT(S)/DIT(S)-3/AST//85/2015-16 Dated: 10/07/2015.

2) Ministery of Finance clarifies Service Charges Collected by Restaurants/Hotels/ Eateries Retained by the Restaurants/ Hotels/ Eateries and are Not ‘Service Tax’ Imposed by the Government.

3) The SEBI raised the minimum size of equity derivatives contracts from Rs. 2 Lakh to Rs.5 Lakh will be made effective from the next trading day after expiry of October 2015 contracts.

4) Income-Tax dept starts electronic verification of ITR To ease tax filing, thereby ending the practice of sending paper acknowledgement to its office in Bengaluru.

5) The AO is entitled to pass a separate order u/s 234E to levy the late filing of TDS Return fee within the limitation period. ITAT chennai.

6) India's CAG has been admitted one of the best auditor of the world by United Nations Org.  leaving aside USA, Britain, Japan, China, Germany etc.

7)S. 234E: Prior to the amendment to s. 200A w.e.f. 01.06.2015, the fee for default in filing TDS statements cannot be recovered from the assessee-deductor while processing the s. 200A statement. However, the AO is entitled to pass a separate order u/s 234E to levy the fee within the limitation period

The Assessing Officer has exceeded his jurisdiction in levying fee under Section 234E while processing the statement and make adjustment under Section 200A of the Act. Therefore, the impugned intimation of the lower authorities levying fee under Section 234E of the Act cannot be sustained in law. However, it is made clear that it is open to the Assessing Officer to pass a separate order under Section 234E of the Act levying fee provided the limitation for such a levy has not expired

IMPORTANT JUDGMENT

 

Sec. 234E which levies fee for late filing of TDS/TCS returns is constitutionally valid, rules HC

Sec. 234E which levies fee for late filing of TDS/TCS returns is constitutionally valid, rules HC

August 11, 2015[2015] 60 taxmann.com 144 (Karnataka)

IT : Section 234E does not suffer from any vices for being declared to be ultra vires of the Constitution. Section i.e., 234E is intra vires of the Constitution

• In the instant petition the petitioners challenged the constitutional validity of Section 234E contending that it is ultra virus of Constitution of India .

• According to petitioners levy or imposition of 'fee' is regarded as a written or consideration for services rendered and in the instant case the Government is not providing any service to the deductors and as such levy of fee under Section 234E is invalid.

• The petitioner submitted that for levy of `fee' services should be rendered by the State and it is quidpro- quo. In the absence of any services being rendered by the State to demand `fee' or levy of such fee would be without authority of law. There being no rational or nexus to `levy' of fee under the impugned provision for `service' being rendered by the State (which is none), such imposition is bad-in-law, unconstitutional and ultra vires of the Constitution.

The High court held as under :

• There cannot be any dispute to the fact that assessee is required to file e-returns to Central Processing Centre – CPC for processing of statements of tax deducted at source vide Section 200A, which provision is in para materia with Section 143(1). While processing the return of income under Section 143(1)(a) no personal hearing is provided to an assessee and as such the same is also not provided under Section 200A. Thus, the doctrine of principles of natural justice is given a go by under impugned provision or its violation thereof would not be a ground available to the petitioners to challenge the impugned provision on this ground. Hence, contention raised in this regard is without merit and stands rejected.

• A person responsible for deduction of tax namely deductor is required to furnish periodical statements containing the details of deduction of tax within the prescribed due date. Any delay in furnishing TDS statements would result in perennial problems being faced by the department while processing the return of income filed by the assessees. When a return of income is filed by an assessee a statutory obligation is cast on the department to process the said return of income within the specified period from the date of filing. If for want of details such return of income not being processed or assessment order not being framed or would be stalled or in other words the return of income filed by an assessee on whose behalf the tax has already been deducted by the deductor is not furnished within the prescribed time by such deductor, it would consequently have cascading effect namely, it would stall the processing of the return of income filed by thedeductee. In a given case, there might be instances of where the assessee would be entitled to refund and on account of delay occurring due to non delivery of TDS statements by the deductors , it would result in delay in extending the credit of TDS to the person on whose behalf tax is deducted and consequently it would result in delayed issuance of refunds to the deductee or raising of consequential demands against the deductee which otherwise would not have been raised. In this lengthy and unwarranted process it may erode the confidence reposed by the tax payer on the department. Last but not the least, it would result in financial burden to the Government namely on account of late payment of refund interest is to be paid on such refunds and it would also result in cash flow crunch, especially for business entities.

• This Court in exercise power vested under Article 226 of the Constitution can declare a statute or a provision in the statute as unconstitutional and there cannot be any dispute with regard to this proposition. However, such power would be exercised where it is clear that impugned Act or provision is beyond its legislative competence or violates the provisions of the Constitution of India. Where two views are possible, one making the statute constitutional and the other making it unconstitutional the former would prevail or would be preferred.

• Thus, viewed from any angle it cannot be held that Section 234E of the Income Tax Act, 1961 suffers from any vices for being declared to be ultra vires of the Constitution. In other words it has to be held that the impugned Section i.e., 234E of the Income Tax Act, 1961 is intra vires of the Constitution.

Payment for lease line charges isn't 'FTS'; not liable to withholding tax u/s 194J

August 11, 2015[2015] 59 taxmann.com 451 (Mumbai - Trib.)/[2015] 39 ITR(T) 23 (Mumbai - Trib.)

IT: There is no requirement to deduct tax at source from payments made to NSE/BSE towards VSAT charges and lease line charges under section 194J

IT: Market to market loss on derivatives could not be treated as contingent liability and hence, same was to be allowed as deduction under section 37(1)

HC comes down heavily on CBDT for constituting ITAT's Special Bench through private meeting

August 11, 2015[2015] 60 taxmann.com 145 (Bombay)

IT : High Court quashes Constitution of Special Bench of ITAT through "private meeting" between CBDT's counsel and Vice-President of ITAT

• Constitution of Special Bench of ITAT set aside since it was constituted following private meeting of Revenue's Special Counsel with the Vice-President of ITAT without notice to the appellant-assessee. The course adopted by CBDT for getting Special Bench constituted is contrary to the rule of law and gives credence to serious grievance of Petitioner(assessee-appellant) that entire attempt by CBDT to get Special Bench constituted was part of political vendetta targeted at him

Apex Court denied to interfere with order of High Court due to meagreness of amount involved

August 12, 2015[2015] 60 taxmann.com 23 (SC)/[2015] 373 ITR 670 (SC)(MAG.)

IT : Where High Court held that report of DVO could not have been taken into account for assessment, in view of meagreness of amount involved, impugned judgment could not be interfered with

High Court sets aside order of CLB as it failed to serve notice to appellant before passing the order

August 12, 2015[2015] 60 taxmann.com 19 (Karnataka)

CL : Where CLB passed order against appellant but no notice was served upon appellant, order of CLB was to be set aside

CUP method to be applied instead of TNMM as assessee was doing job work for its foreign AE

August 12, 2015[2015] 59 taxmann.com 473 (Delhi - Trib.)

IT/ILT: Where assessee had followed CUP method for determining ALP, which was a standard method, it could not be discarded in preference over transactional profit methods unless revenue authorities were able to demonstrate fallacies in application of such method

No rejection of books just because bills of sub-contractor didn't contain address if TDS was deducted on payments

August 12, 2015[2015] 59 taxmann.com 368 (Pune - Trib.)

IT : Where assessee, a civil contractor, made payments to transporters and sub-contractors in course of its business, in view of fact that assessee gave complete addresses and PANs of payees and, moreover, said payments had been made after deducting tax at source, impugned order rejecting assessee's books of account was to be set aside

Delay in passing review order may be condoned by Tribunal

August 12, 2015[2015] 60 taxmann.com 5 (SC)

Excise & Customs : Power of Tribunal to condone delay in filing appeals preferred by revenue on review extends to delay caused in passing review order; hence, delay in passing review order may be condoned by Tribunal

ITAT sounds note of caution for frivolous appeal by revenue; it damages public faith

August 12, 2015[2015] 60 taxmann.com 160 (Delhi - Trib.)

IT : Filing of appeal with complete knowledge of its fate by the Revenue only reflects the mischievous adamancy to attempt to mislead the Tribunal and waste the time of the Court and the officers concerned.

• Filing of an appeal by an Assessing Officer ('AO') is a right which is vested by the statue. However, same should be exercised by applying proper due diligence in order to avoid any inappropriate litigations.

• In the instant case, revenue made an attempt to justify the filing of the appeals by referring to the fact that the relief was granted on the basis of the remand report dated 06.06.2012 thereby consciously ignoring making reference to the second remand report dated 22.06.2012. In the second remand report, the AO accepted that he had verified the loan taken by assessee.

• Since the claim has been given up in the second remand report by the AO himself, he cannot claim to be aggrieved by the findings arrived at relying upon his own remand report. The CIT(A) has accepted the assessee's claim based on the strength of the second remand report. Reference to this material document, i.e., second remand report in the grounds raised is curiously missing. This omission appears to be deliberated and leads us to conclude that the revenue has consciously indulged in engaging in meritless litigation.

• Once the AO in second remand report had already communicated that the enquiries made after issuing notices under Section 133(6) to the parties/persons who had confirmed the assessee's version and the AO concluded that the loans taken stood verified. No further legitimate grievance can then be said to remain for examination by the AO.

• This deliberate, mischievous and selective reference to facts by such responsible persons grievously damages the public faith and belief in the honest fair play of the tax administration.

• Filing of appeal with complete knowledge of its fate by the Revenue only reflects the mischievous adamancy to attempt to mislead the Tribunal and waste the time of the Court and the officers concerned.

• Departmental officers had willfully and deliberately failed to exercise their powers mindfully as required of them as per law and abused government machinery to initiate a litigation which entails financial costs and tarnishes the image of the Department and also strains the government resources.

• Appeal was a prime example of meritless litigation for reasons best known to the few departmental officers having powers of directing authorization for filing appeals.

• ITAT desist from awarding costs considering the statement of CIT that due care shall be taken in future. ITAT hoped that having invited the attention of the chairman, CBDT to this grave assault on the trust and reputation of fair play enjoyed by the tax administration the malaise is immediately addressed.

Repayment of loans without any identity of creditors proved that loan receipts were unexplained incomes

August 12, 2015[2015] 60 taxmann.com 22 (Madras)/[2015] 372 ITR 398 (Madras)(MAG.)

IT : Where assessee's books of account depicted repayment of loan with no identity of creditors and assessee had not produced any material to show that to report loan further loans were availed same was to be treated as undisclosed income of assessee

Tribunal shall be made a party where it is required to defend its own order

August 13, 2015[2015] 60 taxmann.com 18 (SC)

Constitution : When a Tribunal or authority is required to defend its own order, it is to be made a party failing which proceeding before High Court would be regarded as not maintainable

No evasion penalty when legal position before and after amendment wasn't clear

August 13, 2015[2015] 60 taxmann.com 4 (SC)

Excise & Customs : Where, during relevant period, legal position and interpretation of unamended law and position after amendment, was in a fluid state, it would not be appropriate to levy penalty

Remittance advice by foreign bank and bank statement of donor proved genuineness of foreign gift

August 13, 2015[2015] 59 taxmann.com 453 (Mumbai - Trib.)/[2015] 39 ITR(T) 57 (Mumbai - Trib.)

IT: Where entire details of gift transaction were fully explained through bank statement of assessee, remittance advice, bank statement of donor and foreign remittance advice issued by bank, addition made under section 68 was to be deleted

HC directs Centre and UP Govt. to ensure early establishment of CESTAT bench at Allahabad

August 13, 2015[2015] 59 taxmann.com 462 (Allahabad)

Excise & Customs : High Court expressed its displeasure over non-establishment of CESTAT Bench at Allahabad despite Notification dated 1-11-2013 and issued directions to make arrangements for setting up same

Doing survey and preparing design for canal amounted to 'consulting engineer's service' prior to 16-6-2005

August 13, 2015[2015] 59 taxmann.com 307 (Mumbai - CESTAT)

Service Tax : Survey, design, preparation of plan and estimate of canal and its distribution network under a composite work order by qualified consultant/consulting firms would be 'consulting engineer's service' prior to 16-6-2005 and 'survey and mapmaking services' thereafter

AO couldn't ignore interest on FDR while computing remuneration of partners if it was held as business income

August 13, 2015[2015] 60 taxmann.com 34 (Ahmedabad - Trib.)

IT : Where Assessing Officer disallowed a part of remuneration payable by assessee-firm to its partners under section 40(b)(v) on ground that interest on FDRs was to be excluded for purpose of calculation of remuneration payable to partners, since no such adjustment had been made by him while computing income from business, impugned disallowance was to be deleted

Grant of minority status to educational institution doesn't lead to denial of trust's registration

August 13, 2015[2015] 60 taxmann.com 188 (Patna-Trib)

IT : Merely because minority status is accorded to educational institutions run by a society, it cannot be regarded as being established for benefit of a particular religious community; registration cannot be denied on this ground

• Sections 11 and 12 could be taken into consideration for purpose of grant or otherwise of registration under section 12AA inasmuch as it impinges on its public character. Notwithstanding registration granted under section 12AA, no benefit under sections 11 and 12 can be allowed in view of an abiding feature of a society's constitution or its inherent nature

HELD

• To be identified as an educational institution of the minorities, there should be a nexus between the institution and the particular minority to which it claims to be belonging. How could, otherwise, one may ask, it claim to be established for the benefit of the minority community, entitled to the protection guaranteed under article 30(1) of the Constitution, seeking to enshrine the right to serve and promote minority interest? A prescription of a standard or uniform percentage governing admissions may not, however, necessarily serve the purpose, which is to seek non-minority representation to a reasonable extent, while at the same time ensuring that the minority character of the institution is not annihilated, and the right engrafted under article 29(2) not subverted. What is, therefore, required is a balance between the two objectives – the preservation of the rights of the minority to admit the students of their community and that of admissions of 'outsiders' without disturbing the minority character. This balance, however, may not be specified in terms of a fixed percentage, which has to take into account the population as well as the educational needs of the area in which the educational institution is located, variables which are also subject to change with time(refer pgs. 8, 9 of the impugned order). The situation, as it appears, thus, is in a state of flux, though the position in law is clear, with the state governments empowered to prescribe the percentage, and which could be revised or changed from time to time.

• Clearly, thus, a right to regulate admission thereto is an important right of a minority institution. However, we do not find the same expressed in the charter of the assessee-society; there being no reference to any percentage or any restriction or mandate in respect thereof in its 'Aims and Objects'. Whatever implication this may have for its status as a minority institution, we can hardly countenance or subscribe to a proposition which, despite there being nothing either in its memorandum of association (object clause) or its conduct, sanctions a presumption that it is established for the benefit of the minority (Muslim) community, solely on the basis of it being granted the status of minority educational institution – the only restriction in its charter being toward its membership extending only to the members of the said community. If the institution has, by admitting 90 per cent non-minority (non-muslim) students, violated any specific provision or guideline in the matter and, accordingly, stands to lose its minority status, of which we have no clue, so be it. And which again does not help the revenue's case in any manner; rather, only goes against it. Though, therefore, appearing anomalous in-as-much as the minority status implies an inherent right to serve the minority interest, a finding to it being set up or established for the benefit of a particular (Muslim) community cannot be a matter of presumption and rendered de hors any material on record. The answer, as we understand, lies in the complete freedom allowed in the matter of admissions to unaided MEIs up to the undergraduate level as per the decisions by the Apex Court. Why, NCMEI, on similar facts, i.e., a low percentage of minority/s students in an educational institution established by the minorities, granted minority status to a school, holding that the criterion of fixation of a percentage governing admission of a minority community in a MEI cannot be included in the indicia for determining the minority status of such an Institution (Buckley Primary School vs. The Principal Secretary, Government of Orissa in Case No. 1320 of 2009 dated 06.07.2010/APB-I pgs. 103-129). Further, even where reserving such a right, the same may not necessarily translate into a high ratio of minority (muslim) students, for which other practical considerations may be responsible. That no such right stands reserved in the present case only fortifies the assessee's case. Why, yet, it stands granted a minority status, we wonder, which may or may not be the Revenue's concern. There is no claim by it of such status having been granted on account of any mis-representation, or as to the assessee having derived any benefit through misrepresentation. The same may be relevant inasmuch as the genuineness of the activities is a parameter which is to be examined by the competent authority while deciding on registration, even as the allegation cannot be lightly made, and would require being substantiated for it to be taken cognizance of. Notwithstanding, therefore, even if a minority status is accorded to educational institutions run by a society, it cannot be regarded as being established for benefit of a particular religious community. Even though the relevant provision (sec. 13(1)(b)) provides for exclusion of ss. 11 and 12 of the Act, the same could well be taken into consideration for the purpose of grant or otherwise of registration under section 12AA inasmuch as it impinges on its public character. What, we are unable to comprehend, effect or purpose the registration would have where, notwithstanding the same, no benefit under sections 11 and 12 can be allowed in view of an abiding feature of a society's constitution or its' inherent nature.

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