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07.08.2015 - Voice of CA presents - Updates
Friday, August 7, 2015

I. Headlines Today:    

  1. CBDT Press Release: Signing Advance Pricing Agreements (APAs)  (Click for detail)
  2. Service tax on mutual fund distribution to be paid by AMCs  (Click for detail)
  3. Sebi to align governance norms with Cos Act  (Click for detail)
  4. RBI revises exposure norms limit  (Click for detail)
  5. Irdai to hasten online approvals  (Click for detail)


II.  Direct Taxes Case Laws:

1.  DDIT Vs. Association of Unified Telecom Providers of India, I.T.A. No. 2686/Del/2014, Date of Order: 30.07.2015, ITAT – Delhi

Whether mutual organization can be treated as ‘Charitable’ with in the meaning of section 2(15) of the Income Tax Act, 1961

Held - Yes

The Ld CIT(A) has decided the issue in favour of the assessee following the decision of Tribunal in the case of assessee itself for the A.Y. 2002-2003 in ITA No. 593/Del/2006, vide order dated 25/01/2008. An identical issue was also raised before the Tribunal in the case of assessee itself for the A.Y. 2008-2009 in ITA no. 4770/Del/2011 and the tribunal, vide order dated 31.01.2012 has decided the issue in four of the assessee following its earlier order for the A.Y. 2002-2003, where in it was observed that the activities undertaken for the benefit of public at large will not be cease to be charitable if any benefit incidentally arises to the members, settler or to the trustee. Therefore the argument that the litigation was perused for the gain of the members does not hold good in the light of the fact that the objects were for promotion of basic telephone services whose benefits ensured to public at large being the industries and the users, and hence the order of CIT(A) is upheld.

(Please click here for judgment)


2.  Amarjeet Singh Vs. ITO, I.T.A. No. 2347/Del/2014, Date of Order: 30.07.2015, ITAT – Delhi

Whether the interest paid on loan is admissible as expenditure for deduction u/s 57(iii) in absence of interest earned or any direct income earned?
Held - Yes

There is no dispute that interest expenditure is admissible as expenditure as a deduction u/s 57(iii) of the act in computing income under the head “income from other sources”. The authorities below have denied the claimed deduction of interest on the basis that in the present case there is no direct nexus between expenditure incurred wholly and exclusively for earning interest income. The contention of the assessee remained that profit earned on sale of booking of space is taxable under the head  “income from other sources” and similarly the expenditure on account of interest paid on loan for booking of space is also allowable deduction under the same head. In the case of CIT vs. Rajendra Prasad Modi, assessee borrowed money for investment in shares but did not earned dividend, the hon’ble supreme  court was please to hold that the interest was admissible as deduction u/s 57(iii), as such the matter set aside to decide the matter afresh in view of the above cited decision of Hon’ble Supreme Court.  

(Please click here for judgment)

III.  Indirect Taxes Case Laws:

1.  Vidarbha Iron & Steel Co. Ltd. Vs. Commissioner of Central Excise, Appeal No. ST/08/11, Date of Decision: 08.07.2015, CESTAT - Mumbai

Issue: Whether salaries paid to employees out of receipt from another company as per compromise scheme approved by High Court is liable to service tax?

Held: No

Appellant herein was an industry, primarily engaged in the business of manufacture of steel ingots. Due to slump in the steel industry the appellant could not keep the operation continued due to which the creditors filed a petition for winding up of the company. As a compromise scheme, Hon’ble High Court of Bombay approved the said compromise scheme wherein the factory along with the machinery of the appellant was to be given under leave and license to one company namely Ferro Alloys Corporation Ltd. (FACOR) initially for a period of 5 years. For the survival of the appellant the said agreement was renewed from time to time. During the scrutiny of the records by authorities it was noticed that appellant did not discharge service tax liability on an amount received for the salary of employees from FACOR. Accordingly, show cause notice was issued demanding the tax on certain amount along with interest and penalties were sought to be imposed. Appellant contested the show cause notice on merits as well as on limitation. Adjudicating authority after following the due process of law rejected contentions raised by the appellant and confirmed the demand with interest and also imposed penalties.

On appeal before Hon’ble CESTAT, the Hon’ble CESTAT held that the stand of the adjudicating authority holding that the service tax liability arises is incorrect for more than one reason. Firstly, that the clause 8 of the leave and licence agreement specifically states that the employees will be on the muster roll of the appellant and salaries to be paid by the appellant on receipt from FACOR. It is undisputed that the appellant had received only the actual dues towards the employees. Secondly, the arrangement of continuation of the services of the employees by FACOR was an arrangement approved by the Hon’ble High Court of the compromise scheme in order not to deprive the employees of their job and lively hood. Thirdly, there is nothing on record to show that the appellant functioned as a commercial concern engaged in supply of manpower to FACOR during the material period. In our view, the arrangement of the employees of appellant continuing the job and getting paid will be akin to the deputation of personnel to the FACOR. This issue is now squarely covered by the judgement of Honourable High Court of Gujarat in the case of Arvind Mills. Hence, the impugned order is unsustainable and liable to be set aside.

(Please click here for judgment)


IV.  Company Law & Other Matters:

1.  Mausumi Bhattacharjee Vs. M/s Anghalia Housing Pvt. Ltd., CA No. 493/2010, Date of Order: 10.04.2015, Company Law Board - New Delhi

Application under 44 of the Company Board,1991.

In case the applicant has also made a false assertion of the Original Certificates were not in the possession which also disentitle him to relief under regulation 44 of the Company Law Board Regulation, 1991.

(Please click here for judgment)

V.  Reported Cases:

Direct Taxes Segment:

1.  Whether where there was no incriminating material belonging to assessee found during course of search proceedings under section 132 the assessment u/s 153C were not valid - Held, yes.  
(Please click here for detail)


 Golden Rules:

  "Mistakes increase your experience and
experience decreases your mistakes.
You learn from your mistakes
then others will learn from your success"


  Thanks & Regards


Voice of CA

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