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01.08.2015 - Voice of CA presents - Updates
Saturday, August 1, 2015

I. Headlines Today:    

  1. e-Filing of ITR Forms 3,4,7 enabled and e-Filing of ITR 5 and ITR 6 will be enabled shortly (Source:
  2. Non-salaried ITR forms out  (Click for detail)
  3. FPIs need to file tax returns in ITR-6  (Click for detail)
  4. New Accounting Standards Give Cos Tax Jitters  (Click for detail)
  5. Govt working on Changes in 66A of IT Act  (Click for detail)
  6. State Govt. had not objected to revenue-sharing model under GST-law  (Click for detail)
  7. Customs Noti.: The Central Government has made amendment in notification no. 39/96- Customs dated 23rd July, 1996. In the said notification, in the TABLE, against S.No.10A, in column (3), in the Explanation, in item (ii), for the words “functional Director” the words “functional Director or the Chief Executive Officer, as the case may be,” has been substituted. Now, certificate can be signed by Chief Executive Officer also along with functional Director  (Click for detail)


II.  Direct Taxes Case Laws:

1.   M/s. Bhuvan Leasing and Infrastructures Vs. ITO, I.T.A. No. 4977/Mum/2006, Date of Order: 10.06.2015, ITAT – Mumbai

Income from subletting of property is to be assessed as business income where Memorandum of Association permits assessee to pursue business of taking premises on lease and earning income from the same.

Brief facts of the case: The Assessee had granted license to M/s. American Express Bank Ltd. to use the premises which assessee had taken on lessee. Assessee declared such license fee received as income from business and claimed certain expenditure against such income. The Ld. AO issued a show cause notice to the assessee asking as to why the same should not be assessed as income from other sources. In reply, the assessee submitted that its Memorandum of Association permits the assessee to pursue business of taking premises on lease and earning income from the same. However Ld. AO treated the same as income from other sources for the reason that assessee was not the owner of the premises and there was no business activity involved in such subletting. The matter reached the Hon’ble high court, which held that the income from subletting of property was also assessed as income from business in previous years and assessment u/s 143(3) was also completed. Therefore taking a different view for assessment year under consideration is not justified and thus the matter was remanded back to ITAT.

Hon’ble ITAT placed reliance on the judgment of Hon’ble Supreme Court in the case of Chennai Properties & Investment Ltd. vs. CIT where it was held that “where as per the object clause in the Memorandum of Association, was to acquire and hold properties which in turn were let out, then the income arising from such letting out was assessable in the hands of the assessee as income from business”.

In the result assessee’s appeal is allowed.

(Please click here for judgment)

2.  DCIT  Vs. M/s. Achiever Builders P. Ltd, I.T.A. No. 2629/Del/2015, Date of Order: 27.07.2015, ITAT – New Delhi

Penal Payments are to be distinguished for the purpose of allowability as deduction u/s 37.

Brief facts of the case: The Assessee had claimed deduction on account of compensation to customers. The Ld. AO asked the assessee why the same should not be disallowed. The AO contended that the expenditure claimed was penal in nature and not allowable u/s 36 of the Act. He accordingly disallowed such expenditure. However, the Ld. CIT allowed the expenditure relying on the case of CIT vs Indo Asian Switch Gears Pvt. Ltd. (1996) 222 ITR 772/92 Taxman 86 (P&H), as per which penalty paid by appellant for late delivery of goods being breach of an agreement was incidental to business and therefore allowable u/s 37(1) of the Income Tax Act. The revenue filed an appeal before the Hon’ble ITAT.

Hon’ble ITAT held that the payments made were in the form of compensations paid to its customers for delay in handing over the possession of properties. Such liability was incurred in general course of business. The Ld CIT(A) has very rightly held the nature of payment as compensatory and not penal. The case laws relied upon by Ld CIT(A) also supports the decision arrived by him. Therefore, we do not see any infirmity in his order.”

In the result revenue’s appeal is dismissed.

(Please click here for judgment)  

III. Indirect Taxes Case Laws:

1.  M/s RSWM Ltd. Vs. Commissioner of Central Excise, Excise Appeal No. 2900 of 2011, Date of Decision: 07.08.2014, CESTAT - New Delhi

Issue: Whether availment of CENVAT credit on activities relating to business is allowed?

Held: Yes

The appellant is having a captive power plant, the coal for which is brought by rail. For the purpose of transportation of coal to their factory they got a railway siding constructed at Village Namli on Ratlam - Chittor Section. For construction of the railway siding they received Engineering consultancy service over which they paid the service tax of Rs. 76,695/- of which they taken the CENVAT Credit. The Department was of the view that this service received by the appellant has no nexus with manufacture of their final product and accordingly the Jurisdictional Assistant Commissioner vide O-I-O confirmed the Cenvat credit demand of the above amount alongwith interest and imposed penalty. On appeal before Commssioner (Appeals), the Commissioner (Appeal) upheld the O-I-O.

On the appeal before CESTAT, the Hon’ble CESTAT held during period, the definition of input service covered the services used in relation to - procurement of inputs and also the activities relating to business. It is not disputed that the appellant have a captive power plant in their factory which uses coal and coal is transported to the factory by railways and for this purpose only, a railway siding was constructed at railway station Namli on Ratlam - Chittor Section. The construction of railway siding at railway station Namli is only to facilitate the transportation of coal to the appellant’s factory and, therefore, this service has to be treated as service used in or in relation to procurement of input.

(Please click here for judgment)


 Golden Rules:

  "When we are wrong and we surrender,
it means we are honest.
When we are in doubt and we surrender,
it means we are wise.
But when we are right and we surrender,
it means we value relations"


  Thanks & Regards


Voice of CA

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