Transfer Charges collected by Developers for transfer of rights of purchasing a flat are outside the ambit of service tax and not taxable under Real Estate Agent Service. (M/s Ansal Housing & Construction Vs Commissioner of Service Tax)

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Foreign investment in NBFC Sector under 100% Foreign Direct
Investment (FDI) route does cover operating leases.

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Cost audit report in XBRL taxonomy

Companies are required to file cost audit reports (Form-I) and compliance report (Form A) for the financial year 2011-12 onwards (including the overdue reports relating to any previous year) by using XRBL taxonomy. As taxonomy is expected to be notified by 30^th June 2012, these reports would be filed after 30^th June 2012.

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DCIT Vs. Mastek Limited (ITAT Ahemdabad)

Whether foreign income-tax is deductible u/s 37(1). Bar in s. 40(a)(ii) does not apply to foreign taxes

The assessee paid Rs.42.57 lakhs in Belgium as income-tax and claimed that as deduction u/s 37(1). The AO rejected the claim by relying on s, 40(a)(ii) which provides that any sum paid on account of tax levied on profits or gains of business shall not be allowable as a deduction, though the CIT (A) allowed the claim on the ground that the bar in s. 40(a)(ii) did not apply to foreign taxes. On appeal by the department, HELD dismissing the appeal

Held

the term “tax” is defined in s. 2(43) to mean income-tax chargeable under the provisions of this Act. S. 37(1) allows a deduction of all taxes and rates. Taxes levied in foreign countries whether on profits or gains or otherwise are deductible u/s 37(1) not hit by s. 40(a)(ii). It is also not application of income. The same view has been taken by ITAT Mumbai in South East Asia Shipping Co & Tata Sons Ltd.

Amendment in Accounting Standard 11 of the Companies (Accounting Standards) Rules, 2006 by MCA

In respect of accounting periods commencing on or after the 1st April, 2011, for an enterprise which had earlier exercised the option under paragraph 46 the exchange differences arising on reporting of long-term foreign currency monetary items, in so far as they relate to the acquisition of a depreciable capital assets, can be added to or deducted from the cost of the assets and shall be depreciated over the balance life of the assets, and in other cases, can be accumulated in a "Foreign Currency Monetary Item Translation Difference Account" in the enterprise's financial statements and amortized over the balance period of such long term assets or liability, by recognition as income or expense in each of such periods, with the exception of exchange differences dealt with in accordance with the provisions of paragraph 15 of the said rules.

Provided that the option exercised by the enterprise shall disclose the fact of such option and of the amount remaining to be amortized in the financial statements of the period in which such option is exercised and in every subsequent period so long as any exchange difference remains unamortized."

“As per the recent Notification, EPFO(PF Department) is introducing Electronic Challan cum Return (ECR) from April, 2012 for remittance of contributions by all employers...., Employers/Authorized Signatory are required to file the ECR for wage month of March 2012 (payable in April 2012) onwards....”

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Breeze Constructions (P.) Ltd. Versus Income-tax Officer, Ward 3(1)

Disallowance interest expenses holding that the assessee has not commenced its business

Held that:- As per provision of section 36(1)(iii) interest paid, in respect  of capital borrowed for acquisition of an asset for extension of existing  business or profession; for any period beginning from the date on which the  capital was borrowed for acquisition of the asset till the date on which  such asset was first put to use, shall not be allowed as deduction. By  implication this proviso is also applicable when assets are acquired for new  business - against assessee.

Disallowance administrative and other expense by holding that the assessee has not commenced its business

Held that:- Merely taking land on lease, by any stretch of imagination cannot be treated as the commencement / setting up of it's hotel business - against assessee.

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- Lending or borrowing money between two associated enterprises comes within the ambit of international transaction and whether the same is at arm's length price has to be considered. The question of rate of interest on the borrowings is an integral part of arm's length price determination in this context

- Once the transaction between the assessee and the Associated Enterprises is in foreign currency and the transaction is an international transaction, then the transaction would have to be looked upon by applying the commercial principles in regard to international transaction. If this is so, then the domestic prime lending rate would have no applicability and the international rate fixed being LIBOR would come into play.

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TDS on interest payable to foreign company on external commercial borrowings

The newly introduced Section 194LC of the Income-tax Act, 1961 (the Act) prescribes a specified Indian company to deduct tax on interest payable to a foreign company at the rate of 5 per cent.  The Amended Bill has widened the meaning of term “monies borrowed” to include monies borrowed by the Indian company at any time between 1 July 2012 to 1 July 2015, in foreign currency from a source outside India even by way of issue of long term infrastructure bonds.  Further, the Amended Bill has extended these provisions to all Indian companies rather than restricting it to only specified 8 companies under the Bill.

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In order to arrest declining value of rupee, RBI has issued a circular for an immediate implementation as follows: -

-  For all forex earnings eligibility towards retaining foreign currency to EEFC accounts has been reduced to a maximum permissible limit of 50%.  The balance 50% shall have to be converted to Rupee accounts maintained by the clients.

- Existing balances held in EEFC accounts should be converted forthwith into rupee balances and credited to rupee accounts within next 15 days.

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Treatment of capital expenditure on assets not owned by the company

Under the Opinion by the Expert Advisory Committee (EAC) of the Institute of Chartered Accountants of India (ICAI) clarified that costs associated with enabling assets, such as construction of connecting roads, electricity transmission lines, etc., the ownership of which does not pass to the company, do not qualify for being capitalised as Capital Work in Progress even during the construction period. Instead, the EAC opined that the amount spent on enabling assets should be expensed off in the period when these are incurred.

The EAC explained, since the control does not pass to the company such enabling assets do not meet the definition of ‘asset’ as defined in the Framework for the Preparation and Presentation of Financial Statements as issued by the ICAI. Thus these cannot be capitalised even though such enabling assets will provide future economic benefits to the company. The EAC also relied on the guidance provided in AS 26, Intangible Assets, which mentions that where an expenditure is incurred to provide future economic benefits but no asset, intangible or otherwise can be created, such expenditure needs to be expensed off when incurred.

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Living allowance exempt from tax, if paid to employees of Indian company who are temporarily deployed in US to work for Indian Company

The Kolkata Income-tax Appellate Tribunal has held that, living allowance paid in addition to the regular salaries and benefits in India to the employees of Indian Company who are temporarily deployed in US will be exempt from tax.  Thus the living allowance would not be covered by section 17(2) of the Act.  Exemption under section 10(14)(i) of the Act would be available.

This is an important ruling by the Honourable ITAT, which highlights the principle that duration of posting is a relevant consideration in deciding whether the person has been sent on tour or transfer, but it cannot be considered as a conclusive factor.  Further, the factors such as transfer of payroll, nature of service provided, relation with the entity transferred to, visa travelled on, location of family, etc also needs to be analysed in detail.  Further, it is also important for the taxpayer to justify its claim of living allowance under Section 10(14) of the Act read with Rule 2BB of the Rules by proper documentation of the amount spent towards ordinarily daily living charges on account of absence from normal place of duty.

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Clarification on rate of service tax (Circular No. 158/9/ 2012 – ST dated 08-05-2012)

In respect of 8 specified services provided by individual, proprietorship or partnership concern on which service tax liability was payable on payment basis upto 31-03-2012 and services on which tax is paid under reverse charge -  Invoice raised before 01-04-2012 and payment received / made on or after 01-04-2012

- Rate of Service tax shall be 12.36%.

- Supplementary invoice to be issued reflecting new rate of tax & recover differential amount.

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Commissioner of Income Tax Vs Central Warehousing Corporation Income Tax Appeal (999/2011 & 1091/2011) High Court of Delhi Dated 30^th April 2012

Issue

Whether Penalty can be imposed on the assessee where additions are made under the normal provisions of the Act but actually the taxable income of the assessee is assessed not under the normal provisions but under Section 115JB and there is no addition as far as book profits is concerned.

Held

No doubt, there was concealment but that had its repercussions only when the assessment was done under the normal procedure. The assessment as per the normal procedure was, however, not acted upon. On the contrary, it is the deemed income assessed under section 115JB of the Act which has become the basis of assessment as it was higher of the two. Tax is thus paid on the income assessed under section 115JB of the Act. Hence, when the computation was made under section 115JB of the Act, the aforesaid concealment had no role to play and was totally irrelevant. Therefore, the concealment did not lead to tax evasion at all.

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Transfer of Funds allowed from Non-Resident Ordinary (NRO) Account to Non-Resident External (NRE) Account within the overall ceiling of USD one million per financial year by NRI

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Post Budget Updates

- Deferment of implementation of General Anti-Avoidance Rules or GAAR till 2013.

- Roll back of excise levy on all branded and unbranded jewellery

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Big relief to PPP companies

Ministry of Corporate affairs (MCA) has issued notification to clarify the long debatable issue in relation to amortization of the Intangible asset created under BOT (Build, Operate & Transfer), BOOT (Build, Own, Operate & Transfer) or any other form of PPP (Public Private Partnership).

New heading inserted in schedule XIV of the Companies Act, 1956 clarifies that amortization of Intangible asset recognized pursuant to above agreements will be proportionate (actual revenue for the year/total projected revenue from the Intangible asset) of the cost. This method of amortization will further strengthen matching concept of accounting. Amortization formula as well as example has been given by the Ministry to avoid confusions.

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One time relaxation in timeline for submission of Annual Audited Financial Results for listed entities

Considering difficulties faced in submission of annual financial results along with Q4 results and first time adoption of the revised Schedule VI to the Companies Act 1956, SEBI has given relaxation in timeline for submission of annual audited financial results in respect of the last quarter of FY 2011-12 and annual audited results for FY 2011-12.  Listed entities will have an option to either:

- Submit limited reviewed results for the last quarter (Q4) within 45 days from end of the quarter followed by submission of annual audited results as soon as they are approved by the Board of Directors  or

- Submit annual audited results within 60 days from the end of 4th quarter along with results for the last quarter (Q4) which would be a balancing figure.

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Amendment to clause 41 of the equity listing agreement

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Borrower to provide bifurcation of utilisation of the ECB proceeds towards foreign currency and Rupee expenditure at the time of availing Loan Registration Number (LRN) from the Reserve Bank of India.

Further borrower should ensure that ECB proceeds meant for rupee expenditure in India are repatriated to India for credit to Rupee account only.

[2012] 21 taxmann.com 129 (AAR - New Delhi)

IT/ILT : Subscription fee received from customers for providing social media monitoring services through website is taxable as 'royalty' u/s 9(1)(vi) and Indo-Singapore DTAC

AAR held that the applicant is in the business of gathering, collating and making available or imparting information concerning industrial and commercial knowledge, experience and skill and consequently the payment received from the subscriber would be royalty in terms of clause (iv) of Explanation 2 to section 9(1)(vi) of the Act and is liable to be taxed as such under the Act.

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