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01.06.2018 - Voice of CA presents - Latest Updates
Friday, June 1, 2018

  I. Headlines Today:   

  1. Form GSTR-6 due date extended till 31.07.2018  (Click for detail)
  2. Notification in r/o Sec. 56(2) (viib)  (Click for detail)
  3. Notification No. 23/2018: ‚ÄčIncome-tax (6th Amendment), Rules, 2018  (Click for detail)
  4. Six states to roll out intra-state e-way bill from today  (Click for detail)
  5. Explain removal of 1 lakh companies from RoC, action against directors: HC to MCA  (Click for detail)
  6. Govt. issues clarifications on GST refund related issues  (Click for detail)
  7. CBIC prescribes procedure for sanction of pending IGST refund claims  (Click for detail)
  8. Special GST refund fortnight starts from 31/05/18 to 14/06/18 for all pending refunds  (Click for detail)
  9. RBI withdraws rule exceptions for NBFCs owned by govt  (Click for detail)
  10. ICAI: Announcement for withdrawal of the Guidance Note on Accounting for Real Estate Transactions (for entities to whom Ind AS is applicable)  (Click for detail)
  II. Direct Taxes Case Law: 

1. Elektrobit Automotive GmbH Vs. Deputy DIT, I.T.A. No. 678/Del/2013, Date of Pronouncement: 22.05.2018, ITAT -  Delhi

Whether the amount received by grant of user rights in a copyright software qualify as “royalty income”.

Held: Yes

Brief Facts
The assessee is a company incorporated in and a tax resident of Germany. It is engaged in supplying software products, software consultation programming services etc. for the automotive industry. As per analysis of Indo German DTAA, business income of assessee was not taxable in India while royalty income attracted a tax rate of 10%. During AY 2009-10, assessee earned receipt from grant of user rights in its software from Bosch India which was declared as business income by the assessee. The Ld.AO treated the income as ”royalty” and made the addition vide assessment order u/s 143(3) r/w s.144C of Income Tax Act. Being aggrieved, the assessee has filed an appeal before the Hon’ble ITAT.

The Hon’ble ITAT held that license agreement as entered by the assessee itself points out the word ”royalty”. Moreover, considering the facts of case, that license terms obliges the licensee to furnish to assessee monthly statement of supplied products to customers using his software and consequent raising of invoice on that basis, signifies the commercial exploitation of the licensed software and licensee fee for the same shall be treated as “royalty”. Therefore, the appeal was held against the assessee and favour of revenue.

Cases Referred
1.    DIT v. Infrasoft Ltd. [2013] 39 ITR 88.9(HC).

(Please click here for judgment)

2.  Bank Note Paper Mill India Pvt. Ltd. Vs. ITO, I.T.A. Nos. 165 & 166/Bang/2018, Date of Pronouncement: 23.05.2018. ITAT - Bangalore

Whether interest earned on funds which are to be deployed for construction of plant in future be treated as Income in the hands of assessee.

Held:- No

Brief Facts
The assessee was in process of setting up of plant at Mysore for the purpose of manufacturing of currency paper for which it received share capital from Govt.of India and RBI. The funds, not immediately required, were invested in deposits with bank on which interest income of Rs. 21,52,81,724 was earned by the assesse and consequently reduced from preoperative expenses incurred on construction of the plant. The Ld.AO brought to tax the interest income under “Income u/h Other Sources”. The decision was upheld by first appellate on appeal by the assessee. Being aggrieved, the assesse has filed an appeal before the Hon’ble ITAT.

The Hon’ble ITAT by placing reliance on the decision of Hon’ble Supreme Court in case of Bokaro Steel Ltd. held that where the interest receipt is directly connected or incidental to working of construction of assessee plant, it should be reduced from the capital cost of project and not be treated as income. Statement provided by assesse in form of Annexure proves the inextricable link between the interest income earned and project expenditure. The hon’ble ITAT observed that the decision of the Hon’ble Supreme Court in Tuticorin Alkali Chemicals & Fertilizers Ltd. 227 ITR 1721 was distinguished by the Hon’ble Supreme Court in the case of Bokaro Steel Ltd. (236 ITR 315) wherein it was held that the ratio of decision in Tuticorin Alkali Chemicals & Fertilizers Ltd. is not applicable where interest receipt is directly connected with or incidental to working of construction of the assessee’s plant. Therefore, the appeal was held in favour of assessee and against the revenue.

Cases Referred
1.    Tuticorin Alkali Chemicals & Fertilisers Ltd. Vs. CIT (227 ITR 1721) (SC)
2.    Bokaro Steel Ltd. (236 ITR 315) (SC).
3.    CIT vs. Karnal Co-operative Sugar Mills Ltd. (243 ITR 2) (SC).
4.    CIT v. Karnataka Power Corporation, (247 ITR 268) (SC).

(Please click here for judgment)

III. Learn Eating - Be Healthy:

1. Natural Life Style - Be your own Doctor
    Click below for useful audio tips by Acharya Shri Mohan Gupta  


Golden Rules:

  "We should learn from the pair of walking legs,
the foot which is forward has no pride and
the foot which is behind has no shame" 


Thanks & Regards


Voice of CA 

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