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17.06.2016 - Voice of CA presents - Updates
Friday, June 17, 2016

I. Headlines Today    

  1. Double taxpayer base to 100 mn, PM to taxmen  (Click for detail)
  2. Draft GST law envisages harsher penalties for tax evaders  (Click for detail)
  3. CBEC: Speedy disbursal of pending refund claims of exporters of services under rule 5 of CENVAT Credit Rule, 2004  (Click for detail)
  4. Cabinet clears bill for speedy recovery of bad loans  (Click for detail)
  5. SEBI: Continuous disclosures to be made by Infrastructure Investment Trusts registered under the SEBI (Infrastructure Investment Trusts) Regulations, 2014  (Click for detail)
  6. SEBI bans 7 entities in tax evasion case  (Click for detail)
  7. ICAI invites suggestions on Model GST Law  (Click for detail)
II.  Direct Taxes Case Laws: 

1.    Technip Singapore Pte Ltd. Vs. DIT & ANR,  W.P (C) No. 7416/2012,  Date of Judgment: 02.06.2016,  High Court of  Delhi

Whether the income earned from the contract towards mobilization / demobilisation charges should be treated as royalty / fees for technical services?


Brief Facts
The Petitioner, TECHNIP SINGAPORE PTE LTD. a resident of Singapore, is a leading solutions provider of offshore construction, engineering, project management and support services to the oil and gas industry worldwide. Indian Oil Corporation Ltd (‘IOCL’) had invited tenders for the "Residual Offshore Construction work". The work mainly involved installation of IOCL’s supplied SPM in 3 stages and paid for each of the items of work separately although the work was a composite one. AAR put reliance on, Ishikawajima-Harima Heavy Industries Ltd. v. DIT (2007) 288 ITR 408 & held that the consideration for each portion of the contract, if separately specified, can be separated from the whole and thus the mobilisation/demobilisation charges which constituted 68% of the total consideration could be treated as royalty within the meaning of Section 9 (1) (vi) of the Act read with Article 12 (3) (b) of the DTAA.

The Petitioner contended that the mere fact that the equipments were used for rendering services to IOCL cannot alter the nature of the contract, from a ‘contract for services’, to a ‘contract for hiring of vessel and equipment’. Also, under the contract, IOCL had no right to use or control over the movement or operation of any equipments, vessels etc. belonging to the Petitioner and the very purpose of the mobilisation of the equipment was to install the IOCL supplied SPM. Therefore, the AAR erred in concluding that the installation activity was ancillary and subsidiary to the use of the equipment.

The contract was in fact for installation, erection of equipment. Mobilisation/demobilisation constituted an integral part of the contract. Further the dominion and control of the equipment was with IOCL. It was erroneously concluded that the payment for such mobilisation/demobilisation constitutes royalty. In that view of the matter, the consideration for installation cannot not be characterized as Fees for Technical services (FTS) and brought within the ambit of Article 12.4(a) of the DTAA. The resultant position is that no part of the income earned by the Petitioner from the contract with IOCL can be taxed in India.

(Please click here for judgment)


2.  ITO Vs. Moradabad Development Authority, I.T.A. NO. 3005/Del/2013, Date of Pronouncement: 10.06.2016, ITAT - Delhi

Whether a charitable institution registered u/s 12AA of the Income Tax Act,1961 can be denied exemption in the light of the provisions of Section 2(15) even when its activities during the year in the nature of trade,commerce or business?


Brief Facts:
The assessee was granted registration u/s 12AA of the income Tax Act, 1961. As per the observations of the AO, the income of the assessee does not fall u/s 11(1) (a) (b) or (c). AO also observed that the activities of the assessee were not in conformity with its objectives for the year under consideration. The assessee had purchased land and had constructed house/flats/shops on such land and thereafter had sold the same at competitive market prices.  Therefore, AO contented that these activities do not fall under the definition of charitable activities of the assessee. The assessee appealed before the CIT (A). The CIT (A) held that the registration under section 12A has been granted to the assessee and as per law that the charitable institution may carry on incidental business for the attainment of its objectives. Therefore, the construction activities are incidental to the charitable purpose of town planning and assessee is entitled to the deduction u/s 11. Aggrieved by which, the revenue made an appeal before ITAT.

The fact that assessee is registered u/s 12AA of the Income Tax Act has never been denied. Also, the objects of the assessee were not changed anytime during the year under consideration. The main objectives of the assessee that of town planning had been held as charitable at the time of registration under section 12A. In the light of the judgment of the Allahabad High Court in the case of CIT vs. Lucknow Development Authority wherein it had been held that the development authorities will not be affected by the provisions to Sec 2(15). The reliance on the Board Circular is also not applicable in the present case as there was no change in the charitable purpose while doing the activity of development by the assessee. Hence, the assessee will be allowed the deduction.
The appeal of the revenue is dismissed. 

(Please click here for judgment)

III. A Useful Article:

1.  Draft Model GST Law on public domain 

(Please click here for detail)

(Contribution by CA. Bimal Jain and contributor is available at eMail-id:

 Golden Rules:

  "Strength does not come from Winning,
Our struggles develop your Strengths"


  Thanks & Regards


Voice of CA 

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