TAXATION AND ACCOUNTING · 2017. 10. 17. · Avshesh Mercnaitle (P.) Ltd, 44-A BCAJ 697 Pradip N....
Transcript of TAXATION AND ACCOUNTING · 2017. 10. 17. · Avshesh Mercnaitle (P.) Ltd, 44-A BCAJ 697 Pradip N....
TAXATION AND ACCOUNTING
– FEW IMPORTANT DEVELOPMENTS
BOMBAY CHARTERED ACCOUNTANTS SOCIETY
Wednesday, 17th October, 2012
Walchand Hirachand Hall,
Indian Merchants Chamber, Mumbai
Pradip N. Kapasi
Chartered Accountant
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Synopsis
Pradip N. Kapasi
Chartered Accountant
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Purchases(URD)
S. 14A disallowance
Depreciation
Interest
Forex Contracts
Explanation to s. 37
S. 40(a)(ia) & TDS
S. 41(1) & Deemed income
S. 43 B & Actual payments
Shares, Share Capital and premium
Revised GN for real estate Revenue recognition
Purchases (URD) - 1
3
Assumed Facts Purchase of material
Bill of Registered Dealer for second sale
Payment by cheque
Material consumed/sold
Possible Developments Statement of vendor to Sales Tax Department
Disowning of sales by vendor
Demand for payment of sales tax on Purchaser
Payment of sales tax by assessee purchaser
Inquiry by DGIT
Pradip N. Kapasi
Chartered Accountant
Purchases (URD) - 2
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Chartered Accountant
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Income tax Department’s actions Claim for purchases disallowed
Copy of statement of vendor furnished/ not furnished
Cross examination of vendor facilitated/ not facilitated
Evidence in support of purchases
Admission by assessee / Not admitted To buy Peace of mind ∙ Capitalization of income
Penalty
Prosecution
DGIT Report followed by AO Reopening of assessment
Purchases (URD) - 3
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Law Applicable Claim for allowance of expenditure u/s. 37 Question of fact Decision based on evidence Primary onus on assessee to explain and furnish details A.O. to observe natural justice
Furnish copies of material Produce his witness for examination
Onus shifts to AO on explanation by assessee Daya Chand Jain Vaidya, 98 ITR 280 (All.)
A.O. to form his own opinion by examining party and evidences
Relevance of s.69C and its Explanation
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Chartered Accountant
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Chartered Accountant
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Purchases (URD) - 4
Supporting Evidences Invoice
Transport Receipts
Stock Records
Confirmation,
Affidavit
I.T. Details of vendors
Payment Details
Bank Statement
Consumption records Sales Records
Excise records
Comparables – yield, GP Rate, etc.
Books of Accounts
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Chartered Accountant
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Purchases (URD) - 5
Copy of statement /material to be furnished C. Vasantlal and Co, 45 ITR 206 (SC)
Opportunity to cross examine M. Pirai Choodi, 334 ITR 262 (SC)
Issue of summons to vendors Brij Pal Sharma, 333 ITR 229 (P&H)
Summons returned unserved Hi Lux Automotive (P.) Ltd, 183 Taxman 260 (Del.)
Jewel Emporium, ITA No. 402 to 404/JP/2003
Rajesh P. Soni, 100 TTJ 892 (Ahd.)
Purchases (URD)- 6
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Action of Sales Tax Department Permanand, 107 TTJ 395 (Jodh.)
Payments by cheques & confirmation & supportings produced Sutlej Cotton Mills Ltd, 96 Taxman 29 (Del.)(Mag.)
Kashmir Industry Palace , 99 Taxman 323 (Chd.)
Devanbabu Pvt. Ltd, 36 TTJ 664 (Ahd.)
Hindustan Times Ltd, 33 ITD 427 (Del.)
Parasmani Investment (P.) Ltd, 85 ITD 133 (Kol.) (TM )
A.O.’s duty when material produced Genesis Commet P. Ltd, 163 Taxman 482 (Del.)
AO to inquire with AO & Bank of vendor Hi Lux Automotive (P.) Ltd, 183 Taxman 260 (Del.)
Dataware Pvt Ltd, itatonline.org,(Cal.)(HC)
YFC Projects (P.) Ltd, 37 SOT 130 (Del.)(Trib.)
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Chartered Accountant
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Material produced – party not produced Genesis Commet P. Ltd, 163 Taxman 482 (Del.)
Sole reliance on third party’s statement not tenable Dr. R.L. Narang 174 Taxman 96 (Mag.)(Chd.)
Addition on basis of loose papers found N. Swamy, 241 ITR 363 (Mad.)
P.N. Kalyanasundaram, 294 ITR 49 (SC)
Stock records Free India Assurance Services Ltd, 132 ITD 60 (Mum.)
Accommodation purchases Free India Assurance Services Ltd, 132 ITD 60 (Mum.)
Purchases (URD) - 7
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Chartered Accountant
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Chartered Accountant
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S.40A(3) and Accommodation purchase Free India Assurance Services Ltd, 147 TTJ 423 (Mum.)
Rajmal Lakhichand, 74 TTJ 429 (Pune)
Western India Bakers (P.) Ltd, 87 ITD 607 (Mum.)
Books of account not rejected Girnar Construction Co., 261 ITR 463 (Raj.)
Corresponding sales
Unpaid Purchases Mathura Das Ashok Kumar , 101 TTJ 810 (All.)
Comparable yield & Rate of G/P
Presumptive /Presumed/Estimated income Banwari Lal Banshidhar, 229 ITR 229 (All.)
Purchases (URD) - 8
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Chartered Accountant
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Purchases (URD) - 9
Due weightage to credibility of parties
Peak theory
Vijay Proteins Ltd, 58 ITD 428 (Ahd.) Re-opening
Vendor/STax Dept/DGIT/ED/Survey/Search/Audit objection SFIL Broking Ltd, 325 ITR 285 (Del.)
Ranee Singh, 125 TTJ 816 (Del.)
Paramjit Kaur, 311 ITR 38(P&H)
S.14A and Rule 8D - 1 12
Direct interest to be excluded in computation u/r. 8D(2)(ii) Champion Commercial Co. Ltd, (Kol.), itatonline.org
DTAA and disallowance State Bank of Mauritius, 25 taxmann.com 555 (Mum.)
Chapter VI-A deduction and disallowance Kribhco Ltd, 75 DTR 265 (Delhi)
Possibility of taxable capital gains Avshesh Mercnaitle (P.) Ltd, 44-A BCAJ 697
Pradip N. Kapasi
Chartered Accountant
S.14A and Rule 8D - 2
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Stock in trade CCI Ltd, 206 Taxman 563 (Karn.)
Esquire Private Ltd, itatonline.org, (Mum) (Trib.)
American Express Bank Ltd, itatonline.org (Mum)(Trib.)
Presumed income/estimated income Varun Shipping Co. Ltd, 134 ITD 339 (Mum.)
Depreciation Vishnu Anant Mahajan, 137 ITD 189 (Ahd.)(SB)
Fund Management Fees Noble Enclave & Towers (P.) Ltd, 50 SOT 5 (Kol.)
Not applicable for MAT Spray Engineering Devices Ltd, 53 SOT 70 (Chd.)
Pradip N. Kapasi
Chartered Accountant
S.14A and Rule 8D - 3
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Share in profits of firm in a relevant year Delite Enterprises , itatonline.org (Bom.)
Ceiling on Disallowance Gillete Group India (P.) Ltd, 16 ITR (Trib.) 57 (Delhi)
JNJ Holdings Pvt. Ltd, BCAJ Aug. 2012, Pg. 36 (Mum.)
Claim – No expenditure incurred and A.O.’s satisfaction Justice Sam P Bharucha, itatonline.org (Mum.-ITAT)
Auchtel Products Ltd., 52 SOT 39 (Mum.) (URO)
Pawan Kumar Parmeshwarlal , itatonline.org (Mum.- ITAT)
Ad-hoc disallowance BNP Paribas SA, 137 ITD 322 (Mum.)
Pradip N. Kapasi
Chartered Accountant
Depreciation - 1 15
Goodwill, Business Information, Contracts, Franchise
Smifs Securities Ltd, 24 taxmann.com 222 (SC)
Areva T &D India Ltd, 345 ITR 421 (Delhi)
Weizmann Forex Ltd, 51 SOT 525 (Mum.)
Non compete fees
Serum Institute of India Ltd, 147 TTJ 594 (Pune)
GE Plastics India Ltd (Ahd.), itatonline.org
BSE rights on demutualization Sino Securities (P.) Ltd, 134 ITD 321 (Mum.)
Sunidhi Consultancy Services Ltd, 50 SOT 223 (Mum.)
Website an intangible asset Makemytrip (India) (P.) Ltd, 51 SOT 19 (Delhi)
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Chartered Accountant
Depreciation - 2
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Chartered Accountant
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Lease
Operating & Finance Lease IndusInd Bank Ltd, 135 ITD 165 (Mum.)(SB)
Lessee’s claim Mather & Platt (I.) Ltd, 25 taxmann.com 505 (Bom.)
Lessor’s claim Tata Robins Fraser Ltd, 26 taxmann.com 15 (Jharkhand)
Use by lessee Sundaram Finance Ltd, 67 DTR 117 (Mad.)
Depreciation - 3
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Capital expenditure of a charitable entity
Vishwa Jagriti Mission, Sept. 2012 IT Review 83 (Delhi)
Passive use and discontinuity
Oswal Agro Mills Ltd, 341 ITR 467 (Delhi)
Effect of waiver of loan on WDV Expl.10 to s. 43(1)
Steel Authority of India Ltd, 206 Taxman 574 (Delhi)
Terminal Depreciation
Rajeshwari Foundations, 24 taxmann.com 118 (Chennai.)
Pradip N. Kapasi
Chartered Accountant
Depreciation - 4
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Chartered Accountant
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S.50 Gains/Losses Set-off of b/f business loss
Nandi Steels, 143 TTJ 521 (Bang.)(SB)
Lavish Apartment (P.) Ltd,23 taxmann.com 414 (Delhi)
Set-off against Business Income
Unabsorbed additional depreciation Use for less than 182 days
Claim for balance 50% in following year Cosmo Films Ltd, 24 taxmann.com 189 (Delhi)
Life of unabsorbed depreciation Amendment of 2001
Times Guaranty Ltd, 40 SOT 14 (Mum.)(SB)
General Motors India (P.) Ltd, 25 taxmann.com 364 (Guj.)
Interest
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Interest free loan to subsidiary
Tulip Star , 21 taxmann.com 97 (SC)
Interest component in OTS payment
Akay Organics Ltd, itatonline.org (Bom)
On borrowings for asset not put to use
Vardhman Polytex Ltd, 25 taxmann.com 281 (SC)
On convertible Debentures
UAG Builders (P.) Ltd, 25 taxmann.com 205 (Delhi)
Receipt of premium on Debentures
Rakesh Shantilal Mardia , itatonline.org (SC)
Date of accrual for Government Securities
Credit Suisse First Boston , 114 (5) BLR 2783 (Bom.)
Construction period and Proviso to s. 36(1)(iii)
NTPC Sail Power Co. Ltd, itatonline.org (Delhi)
Pradip N. Kapasi
Chartered Accountant
Exchange Fluctuation I
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Currency translations – year end
Maruti Udyog Ltd., 320 ITR 729 (SC)
Woodward Governor , 312 ITR 254 (SC)
Forex forward contracts
Open ended
Nature of loss
Speculation –s.43(5) & Explanation to s. 73
Shares, stocks, scrips, Commodities Munjal Showa, 99 TTJ 227 (Delhi)
ANZ Grindlays Bank, 88 ITD 53 (Delhi)
Hedging
Cir. No. 23D dt. 12.09.1960
Applicability of Explanation to S.73
Apollo Tyres Ltd. 255 ITR 273 (SC)
Cir. No. 3 of 2010 dt. 23.3.2010
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Chartered Accountant
Exchange Fluctuation -II
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Chartered Accountant
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In the course of business; Safeguard against fluctuation
Backed by actual transactions in trade
Trade necessity
Not a dealer in derivatives
Soorajmull Nagarmull, 129 ITR 169 (Cal)
Badridas Gauridu, 261 ITR 256 (Bom)
Bank of Baharain & Kuwait (Mum)(SB)
D. Kishore Kumar & Co., 2 SOT 769 (Mum)
Intergold (I) Ltd., 27 SOT 239 (Mum)
Amortised losses ICAI & NACAS
Nature of losses , Elecon Engineering, 322 ITR 20(SC) Swap cost , IFCI Ltd. , 66 DTR 490 (Delhi)
The Siam Comm. Bank Ltd. , 142 TTJ 235(Mum.)
Explanation to s.37(1) 22
Circular No. 5/2012 dt.01.08.2012 of CBDT 346 ITR 95 (St.)
Commission to doctors KAP Scan & Diagnostic Centre (P.) Ltd, 344 ITR 476 (P&H)
Pt. Vishwanath Sharma, 316 ITR 419 (All.)
Kickbacks J.K. Panthaki & Co, 344 ITR 329 (Karn.)
Rajrani Exports Pvt. Ltd, 52 SOT 168 (Kol.)
Ransom/Protection money Khemchand Motilal Jain Tobacco Products Ltd. 340 ITR 99 (MP)
Swaminathan , 198 Taxman 140 (Karn.) (Mag.)
Neelavathi, 322 ITR 643 (Karn.)
Protection money & hafta Pranav Construction Co, 96 Taxman 323 (Mum.)(Mag.)
Pradip N. Kapasi
Chartered Accountant
Explanation to s. 37(1) - 2
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Traffic Rules Kranti Road Transport , 50 SOT 15 (Vishakha)
Penalty to SE’s Prasad & Co, 341 ITR 480 (Delhi)
Regularisation fees by Developer
Pradip N. Kapasi
Chartered Accountant
S. 40(a) and TDS - 1
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Effect of Expl. 4 to s.9(1)(vi) by FA, 2012 on s.194J Sonata Information Technology, 25 taxmann.com 125 (Mum.)
Effect of retrospective amendment Channel Guide India Ltd, 25 taxmann.com 25 (Mum.)
Proviso for extension of time for payment; retrospective M/s.Virgin Creations, itatonline.org (Cal.)
Bharti Shipyard Ltd, 132 ITD 53 (Mum.)(SB)
Rajamahendri Shipping & Oil Field, 51 SOT 242 (Vishakha)(SB)
Paid’ and ‘Payable’ Merilyn Shipping & Transports , 146 TTJ 1 (SB) (Vishakha)
Claim for deduction only in Return of Income Pranik Shipping & Services Ltd, 135 ITD 233 (Mum.)
No deduction for want of TAN of payee Inderprasad Mathurlal, 43-A, BCAJ 709 (Jp.)
Pradip N. Kapasi
Chartered Accountant
S. 40(a) and TDS - 2
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Nil TDS Certificate from payee
Underwater Services Co, 25 taxmann.com 216 (Mum.)
Receipt of Form 15G/15H Vipin P. Mehta, ITA No. 3317/M/2010 (Mum.)
Short deduction under different provision Chandabhoy & Jassobhoy, 49 SOT 448 (Mum.)
EGS Survey P.Ltd , ITax Review , Sept. 2012, 90(Mum.)
Premier Medical Supplies & Stores , 53 SOT 263 (Kol.)
Reimbursement of Expenses without TDS Minpro Industries Ltd, 65 DTR 113 (Jd.)
Sharma Kajaria & Co, 145 TTJ 1 (Kol.)
Court’s order – payment of interest Akber Abdul Ali , 146 TTJ 57 (Mum.)(UO)
Pradip N. Kapasi
Chartered Accountant
S. 40(a) and TDS - 3 26
Award- Accident claim Geeta Jethani, 25 taxmann.com 23 (NCDRC)
Commission payment on exempt income E.V. Mathai & Sons , 72 DTR 163 (Ker.)(HC)
Baba Farid Vidyak Society, 43-A BCAJ 34 (Asr.)
Credit Card company’s retention Vah Magna Retail Pvt. Ltd, July 2012 BCAJ 56 (Hyd.)
Discount and commission Ahmedabad Stamp Vendors Association (SC), itatonline.org
Non compliance for A.Y. 2007-08 not condoned DIGC Ltd, 14 ITR(Trib) 194 (Mum.)
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Chartered Accountant
S. 41(1) – Deemed Income 27
Waiver of loan for capital asset Xylon Holdings Pvt. Ltd, itatonline.org (Bom.)
Solid Containers Ltd, 308 ITR 417 (Bom.)
Mahindra & Mahindra Ltd, 261 ITR 501 (Bom.)
Contingent deposits from customers Sundaram Finance Ltd, itatonline.org (SC)
One time payment of sales tax Deferral loan Sulzer India Ltd, 42 SOT 457(Mum.)(SB)
Depreciation allowed in past and s.41(1)
Pradip N. Kapasi
Chartered Accountant
S.43B –Actual Payments
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Provision for leave encashment
Hindustan Latex, 209 Taxman 42 (Kerala)
Employee’s contribution and s. 43B
KPMG India (P.) Ltd, 17 ITR (Trib) 569 (Mum.)
Interest on unpaid purchase price
MTZ Poly Films Ltd, 43B BCAJ 654 (Mum.)
Effect on DTAA
State Bank of Mauritius, 25 taxmann.com 555 (Mum.)
Excise duty on finished goods held in stock in trade
Dynavision Ltd, itatonline.org (SC)
Pradip N. Kapasi
Chartered Accountant
Receipt of shares by Firm & CHC- s.56(2)(viia) - 1
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Receipt of shares of a non s. 2(18) company
By ‘firm’ and ‘company’ recipients s. 2(18) company excluded
LLP included
With/out consideration > Rs. 50,000, whole
FMV as per Rules 11U & 11UA
By or From –Resident or not
Substantive not clarificatory
Shares Preference shares included – CD not included
Rights not included - Shares of subsidiaries
Pradip N. Kapasi
Chartered Accountant
Receipt of shares by CHC -2 30
Exclusion for transfers s. 47(via),(vic),(vicb),(vid),(vii) Amalgamation, demerger, co-op. bank succession
No exclusions Similar to s. 56(2)(vii) – Relative, etc.
For stock-in-trade
For shares of foreign companies
For other exempted transfers
For deemed transfers
Adjustment in purchase cost
W.e.f. 01.06.2010
Pradip N. Kapasi
Chartered Accountant
Receipt of shares by CHC - 3 31
COA in hands of recipient – s.49(4) ‘Subjected to tax’ u/s 56(2)(vii) & (viia)
Value that is ‘taken into account’
COA in cases where FMV < Rs. 50,000
S. 49(4) and s. 49(1)
Period of holding and s. 2(42A)
Business receipts
Receipts on distribution
On credit by payer
Deductions admissible
Pradip N. Kapasi
Chartered Accountant
Receipt of ‘premium’ by CHC - s.56(2)(viib)
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Issue of shares by closely held company, A.Y. 2013-14
Receipt’ by a ‘CHC’ from a ‘resident’
Consideration for ‘issue’ of ‘shares’ Where exceeds face value
Tax on excess over FMV of shares -Rs.50,000
FMV as per prescribed method or satisfaction of A.O.
Exemption for issue by VCC, VCF and VCU
Non resident, R&NOR
Preference shares/ Bonus/Right entitle/Right/CD/ESOP/ESOS
Income of the company
Pradip N. Kapasi
Chartered Accountant
Share Capital and s.68- Amendments
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Chartered Accountant
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Law of cash credits up to A.Y. 2012-13
Provisions. Essentials. Case Laws. Normal Rate
Three Amendments of FA, 2012- w.e.f. A.Y. 2013-14
Expanding and extending onus for certain receipts
Share capital. Share premium. Like receipts
From resident
Closely held company –’CHC’
VCC & VCF excluded
Onus to explain sources of source of receipt
Payer to offer explanation- nature & source
Satisfaction of AO
On notice by AO to Payer
Relevance of satisfaction of Payer’s AO
Consequence
Income of CHC
Tax at 30% u/s 115BBE
Absence of discretion
Share Capital and s.68 - Issues
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Chartered Accountant
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Receipt of such amount by whatever name called Preference Shares. CD. Mergers.
Para IX. Rights. Sweat-Equity
Credit in share capital account
R& NOR, change of status
Conversion of loan into equity
Expenditure for issue of capital
Set-off of losses
Motivation of payer
Dual taxation
Year of taxation
Revised (2012) Guidance Note
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Chartered Accountant
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The CA Journal, March 2012, Pg 140
Effective date
Projects commencing on or after 1.4.12 or
Projects where revenue recognized for first time on or after 1.4.12
PCM (%) when to be applied [Para5.1(a) to (d)]
Pradip N. Kapasi
Chartered Accountant
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More than 12 months/ accounting period
Features common to construction contracts
Individual units to different buyers with common amenities
Construction activity- significant part of project
Eligible contract = where 10% of Agreement value realized
PCM only when reliable outcome measurable [Para 5.2(a) to (d) & 5.3(a)]
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Chartered Accountant
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Estimate of project revenue
Probable economic benefits
Project cost
Stage of completion
Actual project cost incurred
Further conditions Critical approvals obtained
Environmental and other clearances Approval of plans, designs, etc Title to land and rights to development Change in land use
Cumulative condition for Revenue Recognition (RR) [Para 5.3(b) to (d)]
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Chartered Accountant
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Stage of completion 25% of estimated C&D cost incurred excl. land cost
Option to adopt suitable criteria Revenue not to exceed standard revenue
Stage of sales 25% of saleable project area sold under executed agreement
Stage of realization 10% of total of agreement value
Method to be adopted for GRR
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Chartered Accountant
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Step -1: Ascertain value of sale agreements executed
Step -2: Determine actual project cost incurred incl. land cost
Step-3: Estimate total project cost incurred incl. land cost
Step-4: Step 1 * Step 2/Step 3
Method to be adopted for cost of GRR
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Chartered Accountant
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Step -1: Determine area sold
Step -2: Determine total project area
Step- 3: Ascertain project cost incurred (incl. land cost) till date
Step -4: Step 1/ Step 2* Step 3
Method to be adopted for GP of the project GRR – cost of GRR
Method for WIP
Project cost incurred (incl. land cost) – proportionate cost of GRR
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Chartered Accountant 41
THANK YOU