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21.07.2015 - Voice of CA presents - Updates
Tuesday, July 21, 2015

 I. Headlines Today:   

  1. CBDT releases Java Utility for e-filing Form 6 to declare black money To download the Java Utility of Form 6  (Click here)
  2. CBDT Order u/s 119(1) of IT Act, 1961 - Validation of Tax Returns through Electronic Verification Code  (Click for detail)
  3. How NRIs can claim tax benefits under DTAA  (Click for detail)
  4. Select panel arrives at middle ground on GST  (Click for detail)
  5. Without tax clarity, masala bonds unlikely this year  (Click for detail)
  6. Sebi Asks AIFs to Give Full Disclosure on `Associates'  (Click for detail)
  7. RBI & Govt on Same Page on Proposed Monetary Policy Framework: CEA  (Click for detail)


II.  Direct Taxes Case Laws:

1.  CIT Vs. M/S. DLF  Commercial Project Corporation, I.T.A. No. 627/2012, Date of Order: 15.07.2015, High Court of Delhi

“Whether the advance amount received by the assessee towards transfer of development rights could be treated as sale consideration?”

Held No.

The assessee follows the accrual system of accounting. The accrual system of accounting takes into consideration all gains and losses pertaining to the accounting period for which income is being ascertained, irrespective of whether income has been actually received or whether expenses were paid out. Similarly, every receipt is not treated as an income of the assessee. The assessee‟s accounting policy is provided for in Accounting Standard 4, Schedule 9. Para 3 of the schedule deals with recognition of Revenue and Related costs:  “Sale of development rights is recognized on accrual basis in the financial year in accordance with the terms of the agreements entered into with the customers”. In the instant case, since no sale occurred, no income can be said to have accrued to the assessee.

The assessee's submission that sale is deemed to have taken place when proper conveyance is executed, in the circumstances is sound. In the absence of any sale, the revenue‟s attempt to bring to tax the advances received by the assessee must also fail, given that such advances were not towards any income that the assessee was entitled to receive in the two assessment years. Indeed, the Business Development Agreement dated 02.08.2006 between M/s DLF Ltd. and the assessee and the Memorandum of Understanding dated 06.12.2006 between M/s DLF Ltd., the assessee and CBDL indicate that the advances received by the assessee from M/s DLF Ltd. and CBDL were for sale of development rights. Since the assessee failed to sell any such rights in the two years in question, the advances received cannot be classified as income.

(Please click here for judgment)


2.  ACIT Vs. Shri Sagar Nitin Parikh, I.T.A. No. 6399/Mum/2011, Date of Order: 03.06.2015, ITAT - Mumbai

Flat booked through builder (yet to be constructed), prior to the date of transfer of the old flat shall not be considered for the purpose of deduction u/s 54.

The booking of a flat which is going to be constructed by a builder has to be considered as a case of “Construction of flat”. We have already noticed that the deduction u/s 54 is available only if the assessee constructs a new house within three years after the date of transfer. In the instant case, the assessee has constructed a house prior to the date of transfer of original house, in which case, the assessee is not entitled to claim deduction u/s 54 of the Act in respect of the cost of new flat.

(Please click here for judgment)  

III.  Indirect Taxes Case Laws:

1.  Delhi Transport Corporation Vs. Commissioner Service Tax, CEAC No. 95 of 2014, Date of Decision: 17.04.2015, High Court Of Delhi

•    Whether Service Tax burden can be shifted upon other person by contractual agreement?
-    Held: Yes

•    Whether the service provider can ask the revenue to collect the tax from the service receiver with whom service provider has entered into contractual agreement for payment of service tax by him?
-    Held: No

The appellants were an autonomous body of Govt. of NCT of Delhi created under the Road Transport Act. The appellants entered into contracts with agencies (contractors/advertisers) providing space to such parties for display of advertisements on bus-queue shelters and time-keeping booths. The agreement provided that it shall be the responsibility of the contractor/Advertiser to pay direct to the authority and MCD concerned the advertisement tax or any other taxes levy payable or imposed by any authority and this amount will be in addition to the license fee quoted. The Department raised demand of service tax under 'Sale of Advertising Space or Time Services' and levied penalty for non-registration, evasion, etc.

Hon’ble High Court held that it is the appellant who have to discharge the liability towards the service tax. Undoubtedly, the service tax burden can be transferred by contractual arrangement to the other party. But, on account of such contractual arrangement, the assessee cannot ask the Revenue to recover the tax dues from a third party or wait for discharge of the liability by the assessee till it has recovered the amount from its contractors. The condition imposed in the agreement with the contractor governs the rights and obligations arising out of the contracts. From such an agreement, DTC would be in a position to recover the amount of service tax paid by it to the Revenue, from the contractor. For purposes of the taxing statute, the appellant is an assessee, and statutorily bound to not only get itself registered but also submit the requisite returns as per the prescription of law and rules framed thereunder.

(Please click here for judgment)


2.  M/s. Tarsem Mittal & Sons Vs. Commissioner of Central Excise, S. T. A. No. 363 of 2009,  Date of Decision: 19.12.2014, CESTAT - New Delhi

Issue: Whether commission received from Western Union is liable to service tax?

Held: No

The appellant is an agent of Western Union on whose behalf appellant is disbursing money to the persons directed by Western Union who is located outside India.    Revenue is of the view that as the service has been performed in India therefore, the service is received by Western Union in India.   Therefore appellant is liable to pay service tax under the category of Business  Auxiliary services for the commission received by the appellant for disbursing money to a person directed by Western Union .

Hon’ble Tribunal relied upon its decision given in the case of Paul Merchant in which it held that in such a cases since services although performed in India but the respondent is located outside India and services has been provided on behalf of the recipient located outside India.   Therefore, it falls under the export of services.  In these circumstances, this Tribunal has held that no service tax is payable by the assessee under the category of Business Auxiliary services.

(Please click here for judgment)


IV.  Company Law & Other Matters:

1.  Shri Bijay Poddar Vs. M/s Coal India Limited, Case No. 59 of 2013, Date of Order: 27.10.2014, Competition Commission of India

Order under Section 27 of the Competition Act, 2002 

The application is found to be frivolous and is dismissed as such in case the Commission notes that the request is devoid of any merits and does not appear to be founded upon any legal basis

The opposite parties have singularly failed to plead and demonstrate any prejudice much less any miscarriage of justice.

(Please click here for judgment)


V.  Reported Cases:

Direct Taxes Segment:

1.   Salary of employees seconded to India to render services to Indian companies under supervision and control of Board of Directors of Indian companies is  taxable in India as per article 12(4) of India - USA DTAA.
2.  Whether transfer pricing adjustment are applicable to AMP expenses by assessee towards promotion of brand legally owned by foreign AE – Held Yes.  
(Please click here for detail)


 Golden Rules:

  "Everything is valuable in just two situations,
before receiving and after loosing.
Try to value things when they are with us.."


  Thanks & Regards


Voice of CA

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