News Letter. II-Issue for the month of August Malad (West), Mumbai Contacts: Tele Fax:

Size: px

Start display at page:

Download "News Letter. II-Issue for the month of August Malad (West), Mumbai Contacts: Tele Fax:"

Elisabeth Mason
5 years ago
Views:

News Letter II-Issue for the month of August 2016 JAYA SHARMA & ASSOCIATES PRACTCING COMPANY SECRETARIES Disclaimer This News Letter provides general information available at the time of preparation.

1 News Letter II-Issue for the month of August 2016 JAYA SHARMA & ASSOCIATES PRACTCING COMPANY SECRETARIES Disclaimer This News Letter provides general information available at the time of preparation. The News Letter is intended as a news update and Jaya Sharma & Associates neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this News Letter. It is recommended that professional advice be taken based on the specific facts and circumstances. This News Letter does not substitute the need to refer to the original pronouncements. Our office is presently situated at 2101, 21st Floor, Sai Akashdeep CHSL, Saibaba Park, Evershine Nagar, Malad (West), Mumbai Contacts: Tele Fax: Our address is jaya@jsa-cs.com, jaya.jscs@gmail.com

2 Legal Updates Links of important Notification & Circulars: Authority Dated Notification & Circulars Name of Link August 30, 2016 Price Dissemination through /2016/76 SMS/Electronic Communication Facility /2016/75 /2016/74 /2016/73 /2016/72 /2016/71 August 30, 2016 August 30, 2016 August 19, 2016 August 19, 2016 August 19, 2016 Trading Hours/Trading Holidays on Commodity Derivatives Exchanges Maintenance and Preservation of Records Modification of Client Codes post Execution of Trades on National and Regional Commodity Derivatives Exchanges Clarification Programmes sponsored by the Exchanges through media channels Position Limits for Hedgers RBI/ /50 August 25, 2016 Guidelines on Enhancing Credit Supply for Large Borrowers through Market Mechanism RBI/ /49 August 25, 2016 Market Repo Transactions in Government Securities Market RBI/ /47 August 25, 2016 Master Circular Collection of Direct Taxes - OLTAS RBI/ /46 August 25, 2016 Risk- based Internal Audit RBI/ /45 August 25, 2016 Prudential Norms for Off-balance Sheet Exposures of Banks Restructuring of derivative contracts RBI/ /44 August 25, 2016 Review of Prudential Norms Risk Weights for Exposures to Corporates, AFCs and NBFC- IFCs

3 Case Laws: 1. Penalty proceedings for contravention of Sections 269SS & 269T are not related to the assessment proceeding but are independent of it. Therefore, the completion of appellate proceedings arising out of the assessment proceedings has no relevance. Consequently, the limitation prescribed by s. 275(1)(a) does not apply. The limitation period prescribed in s. 275(1)(c) applies to such penalty proceedings: The Supreme Court of India in case CIT Vs. Hissaria Brothers decided on August 22, 2016: In Commissioner of Income-tax vs. Hissaria Bros 291 ITR 244 Raj, the Rajasthan High Court held that penalty proceedings for default in not having transactions through the bank as required under Sections 269SS and 269T are not related to the assessment proceeding but are independent of it, therefore, the completion of appellate proceedings arising out of the assessment proceedings or the other proceedings during which the penalty proceedings under Sections 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings. It was held that clause (a) of sub-section (1) of Section 275 was not attracted to such proceedings. It was held that if that were not so, clause (c) of Section 275(1) would be redundant because otherwise as a matter of fact every penalty proceeding is usually initiated when during some proceedings such default is noticed, though the final fact finding in this proceeding may not have any bearing on the issues relating to establishing default e.g. penalty for not deducting tax at source while making payment to employees, or contractor, or for that matter not making payment through cheque or demand draft where it is so required to be made. On appeal by the department to the Supreme Court held dismissing the appeal. 2. S. 145A(a)(ii) applies only to goods and not services. Service-tax billed on rendering of services is not includible as trading receipts. No disallowance u/s 43B can be made for the unpaid service-tax liability which is not claimed as a deduction: Mumbai High Court in case of CIT vs. Knight Frank (India) Pvt. Ltd. decided on August 16, 2016: The High Court had to consider two questions: (i) Whether service tax can be included as part of trading receipts under section 145A of the Income Tax Act, 1961? (ii) Whether unpaid service tax liability can be disallowed under section 43B of the Income Tax Act, 1961? Held by the High Court:

4 (i) It is very clear from the reading of Section 145A(a)(ii) of the Act that it only covers cases where the amount of tax, duty, cess or fee is actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. (ii) In this case, the assessee has admittedly not paid or incurred any liability for the purposes of bringing any goods to the place of its location. In this case, the assessee is rendering services. Thus, on the plain reading of Section145A(a)(ii) of the Act, it is self evident that the same would not apply to the service tax billed on rendering of services. This is so as the service tax billed has no relation to any goods nor does it have anything to do with bringing the goods to a particular location. (iii) The Explanation to Section 145A(a) of the Act does not expand its scope. An Explanation normally does not widen the scope of the main section. It merely helps clarifying an ambiguity. The main part of the Section specifically restrict its ambit only to valuation of purchase and sale of goods and inventory. Rendering of service is not goods or inventory. Goods would mean movables and inventory would mean stock of goods. Therefore, the Explanation would only apply for valuation of sales and purchase of goods and stock of goods as provided in the main part. (iv) Further, it is to be noted that Service Tax was first introduced in India by Finance Act, Section 145A of the Act was first introduced into the Act only by Finance (No.2) Act, 1998 w.e.f. 1st April, It was thereafter substituted by Finance (No.2) Act, 2009 which is identical, except for addition of clause (b), dealing with interest. However, the Parliament did not while substituting it, deem it fit to explicitly include the valuation of Services therein. Thus, it is clear that the legislature never intended to restrict the applicability of Section 145A of the Act only to goods and not extend it to Services. (v) In view of the above, the question (i) as proposed does not give rise to any substantial question of law. Thus, not entertained. (vi) Regarding question (ii) it is an admitted position before us that the assessee had not claimed any deduction on account of the service tax payable in order to determine its taxable income. In the above view, there can be no occasion to invoke Section 43B of the Act. 3. An arbitrator has no power to award pendente lite interest if the same is barred expressly by the contract. It would depend on the nature of the ouster clause in the contract: Supreme Court of India in case of Union of India Vs. Ambica Construction decided on March 16, 2016: Since a doubt was expressed about the correctness of the decision in Board of Trustees for the Port of Calcutta v. Engineer-De-Spaceage [1996] 1 SCC 516 in Sayeed Ahmed & Co. v. State of UP [2009] 12 SCC 26 and Sree Kamatchi Amman Construction v. Divisional Railway Manager (Works) [2010] 8 SCC 767, the matter was referred to a largest Bench for decision. Answering the reference the Supreme Court has held that if contract expressly bars award of pendent lite interest, the same cannot be awarded by the arbitrator. It also made it clear that the bar to award interest on delayed

5 payment by itself will not be readily inferred as express bar to award interest pendent lite by the arbitral tribunal, as ouster of power of arbitrator, has to be considered on various relevant aspects as in the decisions of the Supreme Court. So it would be for the Division Bench to consider it is on merits in this case. Supreme Court of India has Held, as it depends on the overall intention of the agreement and what is expressly excluded by the ouster clause. 4. Company court cannot make enquiries about genuineness of documents submitted to the Registrar of Companies in connection with incorporation of the company: High of Punjab & Haryana in Case of Vinod Krishan Khanna & Others Vs. Amritsar Swadeshi Textile Corporation (P.) Ltd. and Others decided on December 24, 2015: The jurisdiction conferred on the company under section 433 is not to enter into the domain of making enquiries about the genuineness of documents submitted in connection with incorporation of the company, more particularly once certificate of incorporation had been issued by the Registrar of Companies. Disputed questions of fact fall outside the domain of the company court. While exercising its jurisdiction under section 433, the company court does not also embark upon an enquiry into highly disputed or complicated questions of fact which may be the subject matter of adjudication by a civil court and not by company court. Finding no merit in the petition for winding up, the High Court dismissed it holding that the petitioner has not been able to prove on the basis of material and the evidence on record that it is just and equitable to make out an order for winding up of the respondent company. NEWS HIGHLIGHTS: 1. INTERIM ORDERS AND THE COMPETITION ACT, 2002: An important power available to the competition authorities, globally, is the authority to issue interim order in exceptional cases. India is not an exception to this rule. Initially the Competition Commission of India was empowered to grant interim relief by way of issuing temporary injunction. However, on the proposal of shifting of the adjudicatory functions to the Competition Appellate Tribunal, the Standing Committee recommended the making of appropriate changes in the relevant section by replacing the word injunction by the word order or direction. Accordingly, section 33 was replaced by the Competition (Amendment) Act, SOME OF THE SECTION OF THE BANKRUPTCY CODE NOTIFIED: Ministry of Corporate Affairs has recently notified on 5th of August, 2016 the provisions of sections 188 to 194 (both inclusive). Sections 188 to 194 of the Insolvency and Bankruptcy Code, 2016 fall under Chapter I of Part IV (Regulation of Insolvency Professionals, Agencies and Information Utilities) of the Code and relate to the establishment, incorporation and constitution of The Insolvency and Bankruptcy Board of India ( Board ), and include provisions relating to powers of

6 the chairman of the Board and meetings of the Board and also on 19th August 2016 following sections of the said Code came into force: SECTIONS NOTIFIED on 19th August 2016 Section 3 - (i) clause (1); (ii) clause (5); (iii) clause (22); (iv) clause (26); (v) clause (28); (vi) clause (37); section 221; section 222; section 225; section 226; section 230; section 232; section 233;. sub-section (1) and clause (zd) of subsection(2) of sec 239; sub-section (1) and clause (zt) of sub-section (2) of section 240; section 241; and section Sovereign Gold Bonds Series II: Government of India has, vide its Notification F.No. 4(7)-W&M/2016 dated August 29, 2016, announced that the Sovereign Gold Bonds 2016 Series II ( the Bonds ) will be open for subscription from September 01, 2016 to September 09, The Government of India may, with prior notice, close the Scheme before the specified period.

The Commissioner of Income Tax 2. Knight Frank (India) Pvt. Ltd. DATED : 16 th AUGUST, 2016.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 247 OF 2014 WITH INCOME TAX APPEAL NO. 255 OF 2014 The Commissioner of Income Tax 2 Mumbai v/s. Knight