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14.09.2015 - Voice of CA presents - Updates
Monday, September 14, 2015

I. Headlines Today:    

  1. Circular: Online Form Delhi Sugam-2 (in short DS2) will come into force with effect from 15th Sept 2015  (Click for detail)
  2. I T refunds to be sent in 7 to 10 days  (Click for detail)
  3. Bill of lading not basis of customs duty  (Click for detail)
  4. Office Memorandum: Committee to study the feasibility of the recommendations reg. group assessment & system of peer review before assessment  (Click for detail)
  5. Unlock the value of your gold - The recently approved government scheme provides both liquidity and returns  (Click for detail)
  6. RBI Circular No.13: Trade Credit Policy-Rupee (INR) Denominated trade credit  (Click for detail)
II.  Direct Taxes Case Laws:

1.  CIT Vs. Bhagwan Shree Laxmi Narain Dham, I.T.A. No. 269/2015, Date of Order: 07.09.2015, High Court of Delhi

Whether the AO is correct in holding that the anonymous donation  received by assessee would not be exempt within the scope of section 115BBC of the Act, since the activity of the trust was spiritual and not religious.

Held No.

As rightly pointed out by the ITAT itself, the above question cannot be addressed within the narrow scope of the specific wording of some of the clauses of the Trust Deed but in the overall context of the actual activities in which the Trust is involved in including imparting spiritual education to the persons of all castes and religions, organizing Samagams, distribution of free medicines and clothes to the needy and destitute, provision of free ambulance service for needy and destitute patients and so on. The Supreme Court in The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar 1954 AIR 282 SC held that “a religious denomination or organization enjoys complete autonomy in the matter of deciding as to what rites and ceremonies are essential according to the tenets of the religion they hold and no outside authority has any jurisdiction to interfere with their decision in such matters.”

It might well be that a Hindu religious institution like the Assessee is also engaged in charitable activities which are very much part of religious activity. In carrying on charitable activities along with organising of spiritual lectures, the Assessee by no means ceases to be a religious institution. The activities described by the Assessee as having been undertaken by it during the AY in question can be included in the broad conspectus of Hindu religious activity when viewed in the context of the objects of the Trust and its activities in general. For the aforementioned reasons, the Court finds no legal infirmity in the conclusion of the ITAT that for the purpose of Section 115 BBC (2) (a) anonymous donations received by the Assessee would qualify for deduction and it cannot be included in its assessable income.

(Please click here for judgment)


2.  DIT Vs. M/s Erricsson Communications Ltd., I.T.A. No. 106/2002, Date of Order: 04.09.2015, High Court of Delhi

Whether the assessee is obliged  to deduct tax at source in respect of the amount credited to the account of Telefonaktiebolaget L.M. Ericsson, Sweden (hereafter ‘TLME’) on account of royalty payable, where the said entry was subsequently reversed, since the payment of royalty to TLME was not permissible as per the Industrial policy in force atthe material time.

Held No.

The Assessee having accepted that no royalty was payable had also not charged the same as an expense in its books and as indicated earlier, the entries passed for payment of royalty has been reversed. Indisputably, the Assessee neither paid royalty during the period nor reflected the same as payable. In such circumstances, it is difficult to accept that there was any income chargeable to tax which had accrued in favour of TLME. In any view, the Assessee cannot be held to have acknowledged the same by crediting the account of TLME, as admittedly, that entry had been reversed. In our view, mere passing of the book entries, which are reversed,would not give rise to an obligation to deduct TAS by the Assessee, as clearly, there is no debt that can be said to be acknowledged by the Assessee.

Imposition of an obligation to deduct TAS in these circumstances would amount to enforcing payments from one person towards a tax liability of another, even where the person does not does not acknowledge that any sum is payable. This, in our view, is contrary to the scheme of provisions relating to collection of TAS under the Act. It is also not disputed that TLME had not claimed royalty payable from the Assessee and, concededly, no royalty for the period has been paid either. In the circumstances, we are unable to accept that any income had accrued or arisen or deemed to have accrued or arisen, which is chargeable to tax in the hands of TLME. In the absence of any income chargeable to tax arising on account of royalty in the hands ofTLME at the material time, the question of withholding TAS would not arise.

(Please click here for judgment)   

III.  A Useful Article:

1.   No Special Session on GST as the Parliament prorogue Monsoon Session

(Please click here for detail)

[Contribution by CA. Bimal Jain; contributor is available at eMail:  )


IV.  Company Law & Other Matters:

1.  Shri Ajay Nagrath Vs. Rampur Hydro Power Ltd., CA No. 178/2013, CP. No. 38(ND)2013, Date: 12.12.2013, Company Law Board - New Delhi

In the matter of Section 397, 398 of Companies Act, 1956

As per the fact interim order is allowed for the purpose to raise finance from banks/ financial institutions against the immovable and movable assets of the Company for funding the construction of Sechi-II MW Small Hydro Electric Project without involvement of diversion of funds for other purposes.

(Please click here for judgment)

2.  Shri Lalit Aggarwal & Anr. Vs. Shree Bihari Forgings Pvt. Ltd., CA No. 18/2013, CP No. 47(ND) 2008, Date: 07.01.2014, Company Law Board - New Delhi

In the matter of Section 397,398, 402 & 403 408 of Companies Act, 1956

As per the fact and circumstances when there seems lack of monitoring and coordination in the day to day working of company resulting non compliances of statutory  provisions of Companies Act, 1956 as well as outstanding statutory dues involving fines/ penalties. The board directs the Company to appoint an Interim Administrator and complete the statutory audit and other diversion of funds within time schedule frame within 8 weeks.

(Please click here for judgment)


V.  Reported Cases:

Direct Taxes Segment:

1.  Where agent of assessee-company at UAE acted as a liaisoning agent for assessee, and received remuneration from each client successfully solicited for assessee, such services could not be said to be included within meaning of 'consultancy services' and consequently, remittances made by assessee to it would not come within scope of phrase 'fees for technical services' as employed in section 9(1)(vii).
2.  Assessee entitled to deduction of employee's contribution to provident fund only if the same is paid within the due date provided u/s 36(1)(va)-i.e. within the due dates provided by the respective labour laws.  
(Please click here for detail)


 Golden Rules:

Half of our problems in life are because
"We execute without thinking".
Rest half is because
"We keep thinking and never execute.''


  Thanks & Regards


Voice of CA

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