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27.07.2015 - Voice of CA presents - Updates
Monday, July 27, 2015

  I. Headlines Today:    

  1. FM Arun Jaitley: Government to take view on Financial Code after public comments  (Click for detail)
  2. Finance Ministry rules out "knee-jerk" reaction on report to curb money laundering  (Click for detail)
  3. Foreign-funded NGOs will now have to conduct transactions and dealings online  (Click for detail)
  4. Foreign Investors May Not Be Treated on a Par with Locals  (Click for detail)
  5. Participatory notes: A sensitive topic for govt, SEBI and investors  (Click for detail)
  6. Labour law recast to add more leave to maternity, gratuity to be made portable  (Click for detail)
  7. Bounced cheque Company need not be accused  (Click for detail)
  8. Sebi likely to review norms  (Click for detail)


II.  Direct Taxes Case Laws:

1.  ACIT Vs. M/s TBL International Ltd., I.T.A. No. 1322 /Del/2012, Date of Order: 10.07.2015, ITAT - Delhi

Whether the provision for booked debts is of capital nature, for the purpose of calculating book profit u/s 115JB

Held No

Held That addition of provision for book debts of Rs. 41,43,845/- under section 115JB. The Assessing Officer had made this addition on the ground that the provision was made on account of doubtful advance of capital nature. On appeal before the learned CIT(A), the CIT(A) allowed this ground. This issue is no longer res integra as is covered by the decisions of Hon’ble Supreme Court in the cases of Apollo Tyres Ltd. Vs Commissioner Of Income Tax 255 ITR 273 and 300 ITR 251, Malayala Manorama Co. Ltd. v. CIT. Accordingly, this ground of appeal filed by the Revenue is dismissed.

(Please click here for judgment)


2.  M/s Seagram Distilleries Pvt. Ltd. Vs. Jt. Commissioner of Income Tax, I.T.A. No. 4278/Del/2010, Date of Order: 10.07.2015, ITAT – Delhi

Whether the brand registration expenses and other expenses upon development of brand incurred by assessee are in the nature of revenue expenditure.

Held Yes

In the profit and account, the appellant debited an amount of Rs. 30,18,52,870/- under the head advertising, sales promotions and rebates. Out of the same the appellant had shown expenses of Rs. 10,16,10,577/- as brand expenses. The appellant explained that these expenses were incurred for advertising, sales promotion, cost and distribution etc. The Assessing Officer held that the brand expenses were incurred for enhancing the image of the brand and as such it was resulting in an enduring benefit. Therefore, he disallowed the same holding to be capital expenditure. The issue whether the advertisement expenditure is revenue or capital is adjudicated by the Hon’ble Jurisdictional High Court in the case of CIT Vs. Monto Motors, 206 TAXMAN 43 (Del.) vide para 4, wherein

  • “Advertisement expenses when incurred to increase sales of products are usually treated as a revenue expenditure, since the memory of purchasers or customers is short. Advertisements are issued from time to time and the expenditure is incurred periodically, so that the customers remain attracted and do not forget the product and its qualities. The advertisements published/displayed may not be of relevance or significance after lapse of time in a highly competitive market, wherein the products of different companies compete and are available in abundance. Advertisements and sales promotion are conducted to increase sale and their impact is limited and felt for a shortduration. No permanent character or advantage is achieved and is palpable, unless special or specific factors are brought on record. Expenses for advertising consumer products generally are a part of the process of profit earning and not in the nature of capital outlay. The expenses in the present case were not incurred once and for all, but were a periodical expenses which had to be incurred continuously in view of the nature of the business. It was an ongoing expense. Given the factual matrix, it is difficult to hold that the expenses were incurred for setting the profit earning machinery in motion or not for earning profits.”

Following the above ratio laid down by the Hon’ble Jurisdictional High Court, we allow this ground of appeal filed by the assessee.

(Please click here for judgment)    


III. Indirect Taxes Case Law:

1.  M/s P&P Overseas Vs. Commissioner of Central Excise, Excise Appeal Nos. 1307-1308 of 2011, Date of Decision: 29.10.2014, CESTAT - New Delhi

Issue: Whether refund of CENVAT credit is allowed if input services were used in relation to export and the export proceeds were not realized?

Held: Yes

The appellant are a 100% EOU. They could not utilize the Cenvat credit for payment of duty on DTA clearances and since the accumulated Cenvat credit was attributable to the input services which had been used in or in relation to manufacture of the finished products which has been exported out of India, the appellant filed two claims for the period from July 2008 to September 2008 and October 2008 to December 2008 for cash refund of the accumulated Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004. The refund claims were decided by Assistant Commissioner by two separate orders. The Assistant Commissioner disallowed certain portion of refund claim filed by the appellant on the ground that the CHA services and courier services are not eligible for Cenvat credit and secondly the export proceeds have not been received by the appellant. The Commissioner (Appeals) upheld the order of Assistant Commissioner.

On the matter before CESTAT, to the first ground given by the Assistant Commissioner for disallowance was that the CHA services and courier services are not eligible for Cenvat credit, the Hon’ble CESTAT held that the same issue was already decided in the favour of appellant earlier. So, this ground is not valid for rejection. The second ground for rejection was that the export proceeds have not been received by the appellant to this the Hon’ble Cestat held this condition is neither there in Rule 5 of the Cenvat Credit Rules nor this condition has been prescribed in the Notification No. 5/2006-C.E. (N.T.) issued under Rule 5 of the Cenvat Credit Rules. In view of this, the denial of refund claim on the ground that the export proceeds have not been received is not sustainable.

(Please click here for judgment)


IV.  Company Law & Other Matters:

1.  Sh. Shrikant Mantri Vs. M/s Jindal Steel & Power Ltd., CP No. 25/2001 & 26/2011, Date of Order: 24.04.2015, Company Law Board - New Delhi

In the matter of Section 111A of the Companies Act, 1956 whereby the title of shares with complicated and controversial facts is to be decided by the court with detailed trial. As such, no relief as prayed in the petitions is allowed and hence, in interest of justice, the petitioner is hereby allowed to take up the matter in the appropriate Civil Court.

(Please click here for judgment)


V.  Reported Cases - Direct Taxes:

1.   No addition on the basis of unsigned draft agreement to sell found during survey without verification of its legitimacy.
2.  Where additions basesd on the basis of documents copied during survey, it cannot be said that assessment was completed without confronting him with documents relied upon by AO.  
(Please click here for detail)


 Golden Rules:

  "Praise a person as much as you like,
but limit your words while criticising,
because criticism is one loan that
everyone is dying to return with huge interest"


  Thanks & Regards


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