Delhi ITAT allows deduction u/s. 37 for foreign exchange fluctuation losses arising to PE (project office – PO)of assessee (a Spanish company) during AY 2014-15 on account of advance/loan received from the Head Office (‘HO’) in foreign currency towards meeting the working-capital requirement for project execution; Observes that the utilization of the amounts received from HO did not bring any capital asset into existence for the PO; Rejects AO’s contention that since PE is never assessed as an independent entity, investment/remittance by HO cannot be considered as loan, but should be treated as a capital contribution by someone in its own business; Further clarifies that “The Article 7(3) of India-Spain DTAA is not applicable in this case because nothing is paid by the assessee-company to the Head Office on account of loss and no deduction claimed.”; Accepts assessee’s stand that the amount reflects the character of sundry payables to HO and hence, is on revenue account, relies on SC ruling in Woodward Governor, distinguishes Revenue’s reliance on Calcutta HC ruling in Betts Hartley Huett and Co. Ltd:ITAT
HC : Return filing timeline u/s. 153A applicable for availing loss carry-forward in search cases
Calcutta HC rules that in search cases, the due date for filing return, in order to avail carry forward of loss [as required u/s 139(3)], stands extended till the date specified in notice u/s. 153A(1)(a); HC holds that since the search operations in case of assessee-individual were initiated on September 2, 2004, it was no longer necessary for assessee to file his regular return for subject AY 2004-05 by October 31, 2004 [i.e due-date u/s. 139(1)]; Rules that in view of the non obstante clause contained in Sec. 153A (1), the obligation to file the return u/s. 139(1) remained suspended till such time specified in the notice issued u/s. 153A(1)(a); HC concludes that “for the purpose of carrying forward the loss in terms of Sec. 72 r.w.s. 80, in a case where search operations have been conducted u/s 132, the time to file the return within the meaning of Sec. 139(3) has to be regarded as the reasonable time afforded by the consequent notice u/s 153A(1)(a)”; Since the date of notice u/s 153A(1)(a) and the time afforded under such notice was not available on record, HC remits matter back to ITAT to pass an order in the light of the views expressed herein. :HC
Govt. issues Notifications exempting GST under reverse charge mechanism till September 30
Govt. issues Notifications exempting payment of GST on reverse charge basis u/s 9(4), 5(4) and 7(4) of the CGST Act, IGST Act and UTGST Act respectively, till September 30, 2018; Accordingly, amends Notification Nos. 8/2017-Central Tax (Rate), 32/2017-Integrated Tax (Rate) and 8/2017-Union Territory Tax (Rate) : CBIC Notifications
Draft NFRA rules envision takeover of ICAI functions, cast onerous responsibilities on audit firms
Draft NFRA rules prepared by Ministry of Corporate Affairs propose sweeping powers for the new accounting regulator, likely to render ICAI toothless if passed in present form; NFRA functions as envisioned by draft rules include registering auditors, recommending accounting and auditing standards, enforce its compliance through review, inspection & investigation, oversee the quality of service of the professionals, engage in education and advocacy in relation to accounting/auditing, co-operate with national & international organisations and regulators in ensuring compliance with accounting standards; Auditors of listed companies and other prescribed companies to mandatorily resigter themselves with NFRA, those deemed as not “fit & proper” persons to be ineligible for registration with NFRA; Auditors applying for registration with NFRA to submit exhaustive details of their firm including fees received from prescribed clients, information with regards to qualifications made in audit reports and instances of fraud detected by the auditor; Annual return to be filed by the auditors with NFRA; Rules give powers to NFRA to specify standards for audit quality, to conduct investigation and take action in all cases involving professional/other misconduct of an auditor of listed/prescribed companies.
IT Dept. launches instant e-PAN allotment facility ‘free of cost’ for Aadhaar holders
IT Dept. provides for instant e-PAN allotment (Beta version) in near to real time, free of cost for limited period; Individuals (other than minors) with a valid Aadhaar number (with updated Mobile number) can avail the e-PAN allotment facility.
HC : Upholds demand on ‘gutkha’ basis production capacity & unaccounted packing material purchases, pre-May 2008
HC upholds computation of evaded excise duty in respect of ‘gutkha’ on the basis of assessee’s production capacity and unaccounted purchases of packing material; Rejects assessee’s stand that in the absence of Section 3A in the Statute Book prior to May 10, 2008, criteria of production capacity could not be adopted for purpose of estimating evasion of duty; Observes that as a matter of fact, Section 3A was introduced in Central Excise Act just to crystallize and fortify such assessment procedure for notified goods, for which estimation of evaded duty could not otherwise be made; Hence, principles enumerated in provision of said Section cannot be excluded by necessary implication for the period prior to May 10, 2008 as well and consequently, findings of fact arrived at by Adjudicating Authority and CESTAT which reduced the demand to fall in line with extent of evasion do not give rise to any substantial questions of law in terms of Section 35G; Observes, “Such an estimation of clandestine removal of goods could only be used on an estimated production capacity or clandestine removal of such manufactured goods in the packing materials and both these criteria and yardsticks are usually adopted while making best judgment assessment under Excise law or Sales Tax laws” : Karnataka HC
ITAT : Grants relief to Karnataka MLA, deletes Rs. 8.85 cr undisclosed income addition
Panaji ITAT deletes addition towards undisclosed income relating to alleged deposits of Rs. 8.85 cr made by Karnataka MLA (assessee) in a co-operative bank during AYs 2009-10 to 2011- 12; AO had made additions on the basis of statements given by Bank’s Asst. General Manager (‘GM’) with regard to the entries recorded in the diary found during the course of survey operations u/s. 133A; Firstly, ITAT notes that upon summoning, assessee refuted/disowned the entries recorded in the diary against his name and also stated that he is not associated with the Bank in any manner, moreover, the GM could not substantiate his statements by bringing any other corroborative evidences; Furthermore, ITAT opines that “the absence of any document in the form of receipts issued by the recipient or in the form of acknowledgement for money transactions of high magnitude, does not satisfy the test of human conduct and human probabilities.”; With respect to the failure of assessee to avail cross examination, ITAT agrees with assessee that he was not required to prove the negative fact, likewise, as regards presumption u/s. 292C, ITAT holds that it is the primary responsibility of the bank to prove the entries recorded in the books / documents, which the bank has failed to discharge:ITAT
OECD unveils new comparable tax revenue database covering 80 countries
OECD unveils new database providing detailed comparable tax revenue information for 80 countries from 1990 onwards and will expand to cover more than 90 countries by the end of 2018; The database provides reliable and accessible country-specific indicators on tax levels and structures, it integrates information from the four annual Revenue Statistics publications, which provide tailored insights on tax systems and revenue priorities in African, Asian, Latin American and Caribbean (LAC), and OECD countries; The database highlights that across the 80 countries, tax-to-GDP ratios range from 10.8% to 45.9%, states that half of the countries have a tax-to-GDP ratio ranging between 18.2% and 33.2% of GDP; Further, the database highlights that social security contributions and personal income taxes form the highest shares of tax revenue in most OECD countries, with VAT playing a smaller role.; However, the database shows that since 2000, VAT has become increasingly significant in more than three-quarters of the countries, in many cases, with corresponding falls in the share of income taxation or taxes on other goods and services.
Central Board of Direct Taxes notifies modifications for application of Indian tax laws to first time POEM-resident foreign companies
A foreign company is regarded as a resident of India if its place of effective management (POEM) during a given year is in India, w.e.f. tax year 2016-17, as compared to the earlier residency trigger based on test of the entire “control and management” being in India. The insertion of the revised residence rule led to concerns on certain issues in the application of Indian tax laws (ITL) to a foreign company that is treated as a POEM-resident of India.
HC : Releasing share to other partner upon firm’s dissolution amounts to ‘transfer’
Kerala HC upholds revision proceedings u/s. 263, denies long term capital gains (‘LTCG’) claim on assets sold during AY 1999-00 by assessee-partner to the extent of value of assets released in his favour by the other partner upon dissolution of erstwhile firm in March 1997, however, to the extent of own share in assets on dissolution, HC allows Sec. 54EA benefit; Notes that upon dissolution, assessee became exclusive owner of all the firm’s properties as the other (only-remaining) partner released her share in assets in favour of assessee; HC acknowledges that allotment of assets of partnership firm on dissolution being the realisation of a pre-existing right, doesn’t amount to ‘transfer’, cites SC ruling in Malabar fisheries Co.; However, HC holds that “on the release of the share of the other partner, there is a transfer occasioned and the rights over that property accrues to the assessee, only on such release being effected by the other partner”, thus holds the gains as short term with respect to share released by other partner; With respect to Revenue’s stand that in view of sec. 45(4), the entire transaction arising from allotment of assets on dissolution amounts to ‘transfer’, HC clarifies that “Herein, we are not concerned with whether the firm was assessed at the time of dissolution and are only concerned with the erstwhile partners assessment as an individual”, remands matter to ITAT, to decide the quantum of LTCG/STCG after determining valuation:HC
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