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04.11.2016 - Voice of CA presents - Updates
Friday, November 4, 2016

I. Headlines Today    

  1. CBDT Circular: Chapter VI-A deduction on enhanced profits  (Click for detail)
  2. IT Notification: Agreement between the Government of the Republic of India and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes  (Click for detail)
  3. GST Site to Open soon so Filing won't Tax You  (Click for detail)
  4. GST Council finalises peak rate at 28%  (Click for detail)
  5. Multi-layered GST Complicated But Unavoidable, Say Tax Experts  (Click for detail)
  6. Govt. enforced certain provision of 'Insolvency and Bankruptcy code' from Nov. 01, 2016  (Click for detail)
  7. RBI allows banks to issue masala bonds  (Click for detail)
II.  Direct Taxes Case Laws: 

1.  Vatsala Shenoy Vs. JCIT, Civil Appeal No. 1234 to 1245 of 2012, Date of Judgment: 18.10.2016, Supreme Court of India

Whether the capital gain tax will be paid by the partners of the dissolved partnership firm on the sale of its assets?


Background of the case:
All the assessees in the present case were partners in the partnership concern known as M/S Mangalore Ganesh Beedi Works, which was sold to three partners as a going concern after the dissolution of the partnership firm. The receipts from the same was treated as capital gain by the Assessing Officer and the same order was confirmed by the CIT(A), ITAT and thereafter also by the Hon’ble High Court of Karnataka. Aggrieved by which, the assessees are in appeal before the Apex Court.

Contentions of the assessees:

The AR of the assessee contended that the firm was sold as a going concern and as such there could not be any capital gain on the sale of the going concern. Therefore, it has to be treated as the slump sale under Section 2(42C) of the Income Tax Act, 1961. Moreover there was no provision relating to computation and deduction at the time of the sale and the relevant provisions were introduced w.e.f. 01.04.2000.

Contention of the Revenue: 

It was contented by the Revenue that the assets sold to the AOP-3 were those of the dissolved partnership firm though as a going concern because business was carried on by 7 partners as per the Interim Order of the High Court. The income between the interim periods was assessed in the hands of the AOP of 7 Partners and not in the hands of the dissolved firm. Therefore, the assets of the firm in covered under the meaning of ‘Capital Asset’ u/s 2(14) of the Act. Also, the assets were sold after the valuation which is contrary to the provisions of Section 2(42C) of the Act containing the meaning of the Slump Sale. Therefore the Section 45 of the act would apply in the case of the assessees.

It was held that the argument of the assessee regarding the valuation of the goodwill will not survive. Secondly, the income of the firm in the Assessment Year 1995-96 would not be taxable in the hands of the assessee and would be assessed in the hands of AOP-3. Thirdly, the order of the Assessing Officer is upheld regarding the payment of the capital gain tax by the assessee.

(Please click here for judgment)


2.  Bombay Suburban Electric Supply Ltd. Vs. CIT, Income Tax Reference No. 76 of 1998, Date of Order: 13.10.2016, High Court of Bombay

Whether the assessee was entitled to claim the deduction under Section 35B of the Income Tax Act, 1961 as a sub-contractor to the Indian party exporting the Technical know–how to the foreign party?


Brief Facts:
For the assessment year 1979-80, the assessee claimed weighted deduction on expenditure incurred by it on the items listed in Section 35B of the Income Tax Act, 1961. The facts of the case are that the assessee entered into agreement with the Electricity Corporation of Saudi Arabia (ECSA) to provide, deliver at site, erect, set up, work, test, hand over and maintain a turnkey project for an electrification scheme. The assessee also entered into an agreement with Bharat Heavy Electricals Ltd. (BHEL) for sub – contracting a portion of work to BHEL i.e. laying down of transmission lines, overhead lines and distribution lines. The assessee incurred expenditure for the execution of the sub – contract in respect of rendering services in connection with provision of technical know – how to a person outside India which is eligible for weighted deduction u/s 35B(1)(a) of the Act. The AO contended that the assessee was only a sub – contractor of BHEL and therefore, not eligible for the deduction under the stated section. The order of the AO was upheld by both the CIT(A) And ITAT. Aggrieved by which, the assessee

It was contended by the Revenue that the work done by the assessee is not covered in the meaning of technical know-how as per the Section 80MM(2) of the Income Tax Act,, 1961. It was held that after the introduction of the Sub – section (1A) to the Section 35B, it was inserted that the assessee claiming deduction has to be an exporter of goods or technical know-how and the expenditure should have been incurred by him in connection with that business. In the present case, the assessee was a sub-contractor and was responsible to supply goods and services to BHEL.On a bare reading of this contract; it clearly appears to be a sub­contract where obligations are owed by the assessee to the main contractor, namely, BHEL. The  assessee  has  no  obligations  to  the  person  outside  in  India, namely, in this case, ECSA. Also, the exporter of the know-how was the BHEL and the assessee therefore, was not eligible to claim any deduction u/s 35B of the Act.

(Please click here for judgment)   

III. A Useful Video:

1.  GST Council fixes four-tier rate structure at 5%, 12%, 18% and 28%

(Please click here for detail)

2.  Video Presentation on Supply, Time of Supply & Place of Supply of Goods and/or Services under GST

(Please click here for detail)

(Contribution by CA. Bimal Jain and contributor is available at eMail-id: 

Click below for Video on GST impact & preparedness for Service sector:


 Golden Rules:

  "Be slow in choosing a good person
and much slower while loosing them
because relationship is not an opportunity,
it is a sweet responsibility"


  Thanks & Regards


Voice of CA 

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