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29.12.2016 - Voice of CA presents - Updates
Thursday, December 29, 2016


I. Headlines Today    

  1. CBDT Circular: Explanatory Notes on Provisions of the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016 as contained in Chapter IX-A of the Finance Act, 2016  (Click for detail)
  2. CBDT prescribes rules for service of notice under Black Money Act  (Click for detail)
  3. MCA enforced provisions of Companies Act, 2013 for removal of company’s names from ROC  (Click for detail)
  4. FEMA Circular: Purchase and sale of securities other than shares or convertible debentures of an Indian company by a person resident outside India  (Click for detail)
  5. SEBI Circular: Review of the position limits available to Stock Brokers / Foreign Portfolio Investors (FPIs)-Category I & II / Mutual Funds (MFs) for stock derivatives contracts  (Click for detail)
  6. RBI extends loan repayment window to 90 days  (Click for detail)
  7. Audit finds NSE’s system compromised for 18 months  (Click for detail)
  8. Direct tax collections in Mumbai, Delhi in single digit  (Click for detail)
II.  Direct Taxes Case Laws: 

1.  Pr. Commissioner of Income Tax Vs. Senior Manager (Finance), Bharat Heavy Electricals Ltd., I.T.A. No. 242-2016, Date of Order: 09.12.2016, High Court of Punjab and Haryana

Whether where the qualified engineers and supervisors were employed by contractor for the completion and the testing of the tangible structure under the contract work, TDS would be deducted u/s 194J of the Income Tax Act, 1961 and not under 194C for payment to contractor?

Held_No, TDS would be deducted u/s 194C of the Act.

Brief Facts:
TDS inspection was conducted on the assessee u/s 133A of the Income Tax Act, 1961. It was found that the assessee had made payments to 5 contractors in respect of various contracts and had deducted tax u/s 194C of the Act. The AO contended that all the contracts involves technical and professional services and therefore TDS would be deducted u/s 194J and not under 194C. The AO contended that the contracts were not only for the erection and installation work but also for commissioning, testing and trial operation of the various equipments and also to provide all types of labour, supervisors, engineers, inspectors as well as testing and commissioning for the execution of the project. The trial operations were handled by the qualified engineers and technicians and thus, the level of human intervention was high and as such TDS should be deducted u/s 194J. AO held that the assessee was an assessee in default u/s 201(1A) of the Act. CIT(A) held that the services of the qualified engineers and skilled manpower were incidental for the development of a tangible structure and hence the order was made in the favour of the assessee. ITAT upheld the order of the CIT(A). Aggrieved by which, Revenue appealed in the High Court.

It was held that the testing, pre-commissioning, commissioning and post-commissioning are required to be carried out by the contractor to ensure the proper execution of the work and meet the performance parameters. Also, the technical personnel were deployed for and on the behalf of the contractor and not for and on the behalf of the customer. Moreover, the contract between the contractor and the customer did not involve the supply of the professional and technical services as per Section 194J of the Income Tax Act, 1961. Therefore, the decision of the CIT(A) and ITAT is upheld.
The appeal of the Revenue is dismissed.

(Please click here for judgment)


2.  Torm Shipping India Pvt. Ltd. Vs. ITO, I.T.A. No. 1272/Mum/2013, Date of Order: 14.10.2016, ITAT - Mumbai

Whether where reasons for initiation of reassessment proceedings ceased to survive then the AO had no jurisdiction to reassess issue other than the issues in respect of which reassessment proceedings were initiated.

Held: Yes

Brief Facts:
Survey action u/s 133A was carried on the premises of the assessee company. During survey proceedings, the survey officers noticed that the company had rendered certain services which was not recorded in the books of accounts till the date of survey. Consequent to that, the MD of the company offered the aforesaid sum as income to be taxed in the survey proceedings. After that, assessee furnished return of income and include the aforesaid income under the head of business income, the AO could not find mention of the disclosure which was made by the assessee company during the survey proceedings. Therefore, taking note of the aforesaid non-disclosure of additional income, the AO issued notice u/s 148 of the Income Tax Act, 1961, asking the assessee to file the return of income for reassessment for the escapement of income which was not disclosed.
In response, the assessee filed detailed reply clarifying that the income alleged to have been escaped in the Reasons has already been included by the assessee while filing its original return and, therefore, there was no escapement of income, therefore, the proceedings should be dropped. But the AO went on with the reassessment proceedings and completed the same and framed reassessment order by disallowing other expenditure other than the covered by reasons recorded for reassessment.

Hon’ble ITAT held that It is an admitted fact that the impugned income has already been included by the assessee in the return filed originally and same was also clarified by the assessee by way of his reply submitted during re-assessment proceedings. It was also confirmed by the AO when he made no addition in this regard in the assessment order. Under these circumstances, the Assessing Officer was obliged under the law to drop the re-assessment proceedings as per the mandate given under the law. The Assessing Officer was of course at liberty to record fresh reasons and initiate re-assessment proceedings in case any another escaped income was found by him, as permitted under the law. But once the Assessing Officer was of the view that the escaped income as alleged in the reasons recorded by him was not the income actually escaped, but already included in its taxable income and offered to tax by the assessee, it was not legally permissible for him to continue with the reassessment, therefore, the same is hereby quashed.
The appeal of assessee is allowed.

(Please click here for judgment)

III. A Useful Article:

1.  Service tax chargeable on constructed area provided by developers to land owners in lieu of development rights

(Please click here for detail)

2.  7th GST Council Meet: Agreement on CGST & SGST Laws, but stuck on dual control issue

(Please click here for detail)

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

 Golden Rules:

  "Try to learn something about everything
and everything about something"


  Thanks & Regards


Voice of CA 

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