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22.08.2014 - Voice of CA presents - Updates
Thursday, August 28, 2014

  I. Today's Headlines:    

  1. STax Noti.No. 17: Services by a specified organisation in respect of a religious pilgrimage exempted from service tax  (Click for detail)
  2. Cust Cir.No. 9: Guidelines for considering request for exemption from payment of Customs Duty under Section 25(2) of Customs Act, 1962  (Click for detail)
  3. GST: Arun Jaitley readies compensation plan  (Click for detail)
  4. SC judge, ex-Sebi chief rap new Companies Act  (Click for detail)
  5. FM promises to tighten bank norms  (Click for detail)
  6. RBI issues guidelines for NBFCs on lending against shares  (Click for detail)
  7. RBI planning to introduce plastic currency notes next year  (Click for detail)

II.  Direct Tax Case Laws:

1.   The Commissioner of Income Tax Vs. Jubilant Foodworks Pvt. Ltd. ITA No. 310/2014, Date of Order: 01.08.2014, Delhi High Court

Whether franchise fee revenue in nature?

Held Yes, if no new asset came into existence on account of payment of franchise fee and the rights under the agreement were only for the tenure of the agreement.

The respondent-assessee had paid a lumpsum consideration of $200000, which was capitalised and was not treated as revenue expenditure. We are not concerned and there is no dispute raised by the Revenue on the said payment. We are only concerned with the franchise fee fixed @ 3% of the entire sale, i.e., the turnover of the assessee in India. The said fee was payable in terms of franchise agreement dated 27th March, 1995 as long as the respondent-assessee continued to utilise and use the trademark Dominos . It was payable annually and was not a lumpsum payment, though the last factor alone may not be determinative whether the payment was revenue and capital.

(i)    The expenditure incurred towards initial outlay of business would be in the nature of capital expenditure, however, if the expenditure is incurred while the business is on going, it would have to be ascertained if the expenditure is made for acquiring or bringing into existence an asset or an advantage of an enduring benefit for the business, if that be so, it will be in the nature of capital expenditure. If the expenditure, on the other hand, is for running the business or working it, with a view to produce profits, it would be in the nature of revenue expenditure;

(ii)    It is the aim and object of expenditure, which would, determine its character and not the source and manner of its payment;

(iii)    The test of once and for all payment i.e., a lump sum payment made, in respect of, a transaction is an inconclusive test. The character of payment can be determined by looking at what is the true nature of the asset which is acquired and not by the fact whether it is a payment in lump sum or in an installment.

(Please click here for judgment)

2.  Sumit Devendra Rajani Vs. ACIT OSD, Special Civil Application No. 2349 of 2014, Date of Order:  23.06.2014, Gujarat High Court

TDS credit has to be given to the payee as per TDS certificate given by employer even if details of Form 26AS mismatch withthat or deductor is at fault for non-deposit of TDS with Govt.

It is held that the petitioner assessee deductee is entitled to credit of the tax deducted at source with respect to amount of TDS for which Form No.16A issued by the employer deductor – M/s. Amar Remedies Limited has been produced and consequently department is directed to give credit of tax deducted at source to the petitioner assessee – deductee to the extent form no.16 A issued by the deductor have been issued. Consequently, the impugned demand notice dated 6.1.2012 (Annexure D) is quashed and set aside. However, it is clarified and observed that if the department is of the opinion deductor has not deposited the said amount of tax deducted at source, it will always been open for the department to recover the same from the deductor. Rule is made absolutely to the aforesaid extent. In the facts and circumstances.

(Please click here for judgment)             

 Golden Rules:

  "The biggest obstacle to happiness is,
undervaluing what we have and
overvaluing what others have"


  Thanks & Regards


Voice of CA 

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