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22.06.2015 - Voice of CA presents - Updates
Monday, June 22, 2015

I. Headlines Today:    

  1. CBDT: CIT(A) Must Pass Appellate Order Within 15 Days Of Hearing  (Click for detail)
  2. Making company registration easy  (Click for detail)
  3. IT raids: Assessee’s rights limited  (Click for detail)
  4. New norms make exit flexible for NPS investors  (Click for detail)
  5. Income Tax department plans stringent action against habitual evaders  (Click for detail)
  6. Compliance Window for black money in July  (Click for detail)
  7. NSE to begin overnight investment facility from today  (Click for detail)


II.  Direct Taxes Case Laws:

1.   Principal Commissioner of Income Tax Vs. Ram Shipping Industries Pvt. Ltd., Tax Appeal No. 253 of 2015, Date of Order: 16.04.2015, Gujarat High Court

Loan taken from a company in which Assessee Company is not a registered shareholder, such loan should not be treated as deemed dividend u/s 2(22)(e) of Income Tax Act, 1961.

In brief, the AO invoked provision of section 2(22)(e) of the Act on the ground of common shareholders having substantial interest in both concern. Whereas, the assessee contented that it was not a registered shareholder in the company from whom the loan obtained and the same could not be treated as deemed dividend. The CIT (A) confirmed the addition.

The Tribunal has deleted the addition by placing reliance on the decision of Hon’ble High Court of Bombay in the case of CIT Vs. Impact Containers Pvt. Ltd and Ors. (ITA No.114/2012) and Delhi High Court in the case of CIT Vs. Ankitech Pvt. Ltd 340 ITR 14 (Del.).   

Hon’ble High Court has observed that Section 2(22)(e) of the Act provided that the assessee-Company must be a shareholder in the Company from whom the loan or advance has been taken and should be holding not less than 10% of the voting power. It does not provide that any shareholder in the assessee-Company who had taken any loan or advance from another Company in which such shareholder is also a shareholder having substantial interest, Section 2(22)(e) may be applicable. Thus, the decision of the Tribunal is upheld and tax is dismissed.

(Please click here for judgment)


2.  Rajiv Kumar Garg Vs. ITO, I.T.A. No. 519/ Del/2014, Date of Order: 15.06.2015, ITAT -  Delhi

No penalty u/s 271(1)(c) of the Income Tax Act, 1961 can be imposed in case where addition  is made on account of estimated value of closing stock.

In brief, assessee is engaged in trading of cement and the AO made addition merely on estimated valuation of the closing stock by applying the rate of last purchase bill and imposed penalty thereon which has been confirmed by the CIT (A).

The Tribunal held that apart from this estimate made by the AO, there is nothing to show that the way in which the assessee valued its closing stock was incorrect. This divulges that the addition has been made only on the estimation basis by the Ld. AO. However, it is a settled legal position that when income is estimated, then, there can be no question of imposing penalty u/s 271(1)(c). The Hon’ble Delhi High Court also held in case of CIT vs. Aero Traders Pvt. Ltd that no penalty u/s 271(1)(c) can be imposed when income is determined on estimate basis.  Similar view has been taken by the Hon’ble High Courts in Harigopal Singh vs. CIT and CIT vs. Subhash Trading Company. Thus, when the bedrock of instant penalty is the estimate of valuation of closing stock, the same cannot be sustained and the appeal is allowed.

(Please click here for judgment)   

III.  Indirect Taxes Case Law:

1.  Avtar & Company Vs. Commissioner of Central Excise, Appeal No. ST/170/2008, Date of Decision: 15.01.2014, CESTAT - Mumbai

Whether service recipient do no pay the service tax amount to service provider, in these circumstances do service provider liability to pay service tax obliterate?

Held: No
The applicants were engaged in the activity of ‘Site Formation and Clearance, Excavation and Earthmoving and Demolition Services’. The present demand pertains to the period prior to September, 2006 i.e., 16-6-2005 to 24-9-2006. The applicants during the alleged period did not obtained the registration under service tax and therefore not paying the service tax to the department. The applicants contended that the service receiver did not reimburse them the service tax amount and therefore they were not paying the service tax.

The Hon’ble CESTAT held that service tax liability is not dependent upon whether the service recipient makes the payment of service tax or not. The taxable event is the rendering of service and liability has to be discharged on receipt of consideration. Thus, the contention of the applicant that service tax portion was not reimbursed to them so they were not paying the service tax is not acceptable and hence applicants were liable to pay the service tax.

(Please click here for judgment)


IV.  Company Law & Other Matters:

1.   F. S. Saggu Vs. The Union of India, W.P. (C) No. 4296 OF 2015, Date of Order: 05.05.2015, High Court of Delhi

As per Banking Regulation Act, RBI is empowered to issue guidelines for classifying an asset as non performing asset could not be said to be ultra vires, unconstitutional and void.

(Please click here for judgment)  


V.  Reported Cases:

Direct Taxes Segment:

1.   Satisfaction of the AO to make disallowance u/s 14A must be based on clear and cogent material that interest bearing funds have been used to earn tax free income.
2.  Whether Commerciality challenges the genuineness of charitable nature of education activities of a trust or institution under the amended provision of section 2(15).  
(Please click here for detail)


 Golden Rules:

  "Every success makes us grow strong,
because it teaches us what to do,
but every failure makes us stronger,
because it also teaches us what not to do"


  Thanks & Regards


Voice of CA

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