rnm alert vol lxxvi may 2015

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  • All Rights of Circulation restricted

    www.rnm.in

    ISSUE NO.76 MAY, 2015

    RNM ALERT

    Thinking of the Bottom Line Think of Us

    Dear Readers, The summers are upon us and soon most of you would be ready to pack your bags for cooler climes. India is reeling under a severe heat wave. The economy is in the meantime fairing better with the Q4 (January- March 2015) numbers for GDP at 7.50% and the financial year 2014-15 annual GDP at 7.30% which is higher than the previous year number of

    6.90% pointing to a soft recovery. Team RNM is overall pleased with the performance of the new Modi Government during this past one year. Achieving the target for roll out of the Goods and Services Tax (GST) by April 1, 2016 will be the toughest test of the Government. The forthcoming RBI policy review on June 2, 2015 where it is expected that an interest rate cut would be announced would act as a further stimulus to propel the economy forward, if announced. On the Indirect Tax front, the notification for the increase in Service Tax rate from 12.36% to 14% with effect from June 1, 2015 was released, in line with the Budget 2015 proposals which became law thru the Finance Act, 2015 on May 14, 2015. Recently, a leading case decided in the Honble High Court of Punjab & Haryana in CHD Developers Limited, Karnal Versus The State of Haryana and others dealt with a few substantial questions on levy of Value Added Tax (VAT) on Land Value and also on whether developers are work contractors. With the recent decision of the constitutional bench of the Supreme Court of India, the National Company Law Tribunal and the National Company Law Appellate Tribunal should soon become operational. Team RNM feels that this would enhance the ease of doing business in India. I hope the readers enjoyed reading the Research Report on Restaurant Services market in India which was published by Team RNM recently and the earlier RNM Special Corporate Alert which dealt with the amendments in the Companies Act, 2013.

    Regards, CA U.N. Marwah

    For and behalf of the RNM Alert Editorial Board

  • Issue No. 76: MAY, 2015 Page 2 of 23

    CONTENTS Direct Tax -Case Laws -Residential Status 4

    -Basis of Charge 4

    -Charitable Trust 4

    -Expenses in relation to exempt income 4

    -Profits or Gains of Business or Profession 5

    -Cash Credits 5

    -Deductions 5

    -Transfer of Jurisdiction 5

    -Assessment Proceedings 6

    -Tax Deducted at Source 6

    -Interest for Advance Tax 7

    -Settlement Commission 7

    -Penalties 7

    Indirect Tax

    Service Tax

    -Case Laws -Components of capital goods are eligible for credit even if they don't fall under specified tarheadings 8 -Construction of railway siding to transport coal to captive power generating plant amounts to input service 8 -Deptt has to prove payment as bogus in order to deny credit availed on such payment 8 -Housekeeping and gardening services availed to maintain factory in eco-friendly manner are eligible for credit 9 -Interest would be leviable if assessee doesnt contest demand on merits 9 -Mobile telephone services consumed by employee/staff is eligible for credit 9 -No limitation on powers of legislature to levy a tax on rendition of 'sovereign' service : CESTAT 9 - Steamer agent's services provided to foreign clients on Indian shores against foreign exchange amounted to export 9

  • Issue No. 76: MAY, 2015 Page 3 of 23

    DIRECT TAX DIRECT TAX

    -Transit insurance of capital goods is eligible for input service credit 9 -Tribunal cannot follow discriminatory approach on same issues 10 -Value of free of cost supplies made by recipient isn't includible in gross amount charged for abatement purposes 10 Company Law Updates

    - Circular

    -Companies (Amendment) Act, 2015 10 -Amendment of Companies (Registration Offices and Fees) Rules, 2014 10 -Amendment of Companies (Registration of Charges) Rules, 2014 10 -Amendment of Companies (Incorporation) Rules, 2014 10 -Amendment of Companies (Declaration and Payment of Dividend) Rules, 2014 11 -Amendment of Companies (Share Capital and Debentures) Rules, 2014 11 -Amendment of Companies (Incorporation) Rules, 2014 11 RBI Updates

    - Circular

    - Foreign Exchange Management (Permissible Capital Account Transactions) 12 (Third Amendment) Regulations, 2015 - External Commercial Borrowings (ECB) denominated in Indian Rupees (INR) Mobilization of INR 12

    Corporate Finance - Latest News

    - Private Equity 12-13 - Mergers & Acquisition 13-16 - Venture Capital 17-22

  • Issue No. 76: MAY, 2015 Page 4 of 23

    DIRECT TAX Case Laws Residential Status Sec 6 - Involuntary stay must be excluded from computation for purposes of Section 6(1)(a) of Income Tax Act [CIT Vs. Shri Suresh Nanda (Delhi High Court), I.T.A. No. 715/2014]

    Basis of Charge Sec 9 - Remuneration paid to overseas liaison agent is not 'consultancy fees' and is not FTS u/s 9(1)(vii) [CIT v. Grup Ism (P.) Ltd. [2015] 57 taxmann.com 450 (Delhi)]

    Sec 9 - Retrospective amendments seeking to tax income of non-residents does not affect the source rule. The amendment makes no any difference to the non-taxability of payments made to foreign companies if the income accrues abroad. [DCIT V. M/S. Lufthansa Cargo India, ITA 95/2005]

    Charitable Trust Sec 12AA - When the main object of the institution was "charitable in nature", the activities carried out towards the achievement of the said, being incidental or ancillary to the main object, even if resulting in profit and even if it is carried out with non-members, were all held to be "charitable in nature [IP India Foundation V. DIT (Exemptions), 2015 (5) TMI 919 - ITAT HYDERABAD]

    Expenses in relation to exempt income Sec 14A - disallowance of expenses incurred on borrowings made for purchase of trading shares cannot be made u/s.14A [CIT vs. India Advantage Securities Ltd (Bombay High Court)INCOME TAX APPEAL NO.1131 OF 2013]

  • Issue No. 76: MAY, 2015 Page 5 of 23

    Profits or Gains of Business or Profession Sec 32 - The assessee has the right to disclaim depreciation in its entirety. However, it cannot claim depreciation for the current year and disclaim unabsorbed depreciation. [Seshasayee Paper & Boards Limited V. DCIT, (ARISING OUT OF SLP (C) NO. 15251 OF 2008] Sec 40(a)(ia) - Once the specified forms have been collected under Rule 29D(4)(ii) by the assessee even if the same is not submitted to the CIT for one reason or another, the assessee is not required to deduct tax at source u/s 194C and therefore provisions of section 40(a)(ia) cannot be made applicable. [ITO V. Gautam Roadways (P) Ltd, TOG-731-ITAT-KOL-2015]

    Sec 43A - The money advanced by assessee for the purpose of purchasing raw material which was written off would bear the character of revenue expenditure and deletion of amount on account of depreciation on capitalization of foreign gain/loss when the intermediate fluctuation in the rates of foreign exchange does necessarily enhance the actual cost of the depreciable assests. [CIT, Kolkata-III V. M/s ITC Ltd, TOG-770-HC-CAL-IT-2015]

    Sec 43B - Conversion of outstanding interest into a loan does not amount to an "actual payment" of the interest and so deduction for the interest cannot be claimed. [CIT vs. M. M. Aqua Technologies Ltd (Delhi High Court) ITA 110/2005] Cash Credits Sec 68 - wherein it was held that the onus to prove genuineness, creditworthiness and identity of the transaction is on the assessee and mere production of incorporation details, PAN or income tax returns may not be sufficient when surrounding and attending facts predicate a cove