Draft Resolutions For Professionals under Companies Act,2013
CS Divesh Goyal
1. TO TAKE NOTE OF KEY MANAGERIAL PERSONNEL (KMP) OF THE COMPANY UNDER SECTION 203 OF THE COMPANIES ACT, 2013:-The Chairperson informed the Board pursuant to provision of Section 2(51) & Section 203 read with rule made there under and other applicable provisions of the Companies Act, 2013 there is need to designate Company Secretary Mr. —————– as Key Managerial Personnel.
After discussion following resolution passed unanimously:-
"RESOLVED THAT, pursuant to Section 2(51) & Section 203 read with rule made there under and other applicable provisions of the Companies Act, 2013 (including any statutory modification(s) or re-enactment thereof for the time being in force) Mr. ——————— Company Secretary, who has already given his consent to act as Key Managerial Personnel, be and is here by designated as whole- time Key Managerial Personnel w.e.f. ————- to perform the duties required to be performed by a KMP and Company Secretary under the Companies Act, 2013 and rule made there under and such other duties as assigned to him by Board from time to time."
"RESOLVED FURTHER THAT, Mr. ————— (DIN: ——-) and Mrs. ———– (DIN: ———), Directors of the Company either jointly or severally be and are hereby authorized to do all such acts, deeds, things etc. as may be required to comply with all formalities in this regard."
2. TO SPECIFY A DIRECTOR AS OFFICER WHO IS IN DEFAULT:-
The Chairperson informed the Board pursuant to Section 2(60) read with rules made there under and other applicable provisions of the Companies Act 2013, there is need to specify KMP or any director of company as Officer who is in default.
After discussion following resolution passed unanimously:-
"RESOLVED THAT, pursuant to Section 2(60) read with rules thereof and other applicable provisions of the Companies Act 2013 (including any statutory modification(s) or re-enactment thereof for the time being in force) Mr. ————, Company Secretary of Company (KMP) who has given his consent to act as such, be and is here by, specified as Officer who is in default w.e.f. ——————."
"RESOLVED FURTHER THAT, Mr. ————— (DIN: ——-) and Mrs. ———– (DIN: ———), Directors of the Company either jointly or severally be and are hereby authorized to do all such acts, deeds, things etc. as may be required to comply with all formalities in this regard."
3. TO AUTHORIZE BOARD TO BORROW MONEY:-
The Chairperson informed the Board that the company may borrow money for the business operation of the Company upto Rs. ——- Lacs (———– Lacs Only) which is within the limits prescribed under section 180 of Companies Act, 2013. The approval of the Board is to be accorded in accordance with section 179(3) of Companies Act, 2013.
After Discussion the following resolution was passed unanimously: -
"RESOLVED THAT pursuant to Section 179 (3)(d) and other applicable provisions, if any, of the Companies Act, 2013 or subject to such modification and re-enactment thereof, consent of the Board of directors of the Company be and is hereby accorded to avail loan upto Rs. ——– Lacs (Rupees ——— Lacs Only).
"RESOLVED FURTHER THAT Mr. ————— (DIN: ——-) and Mrs. ———– (DIN: ———), Directors of the Company either jointly or severally be and are hereby authorized to do all such other things, acts and deeds etc. as may be required to comply with all formalities in this regard."
4. TO INVEST THE FUNDS OF THE COMPANY:
The Chairperson informed the Board that the company may invests its surplus funds time to time for different purposes within the limit envisaged under section 186 read with rule 11 of companies (Meetings of Board and its Powers) Rules, 2014 of the Companies Act, 2013. The approval of the Board is to be accorded in accordance with section 179(3) (e) of Companies Act, 2013.
After Discussion the following resolution was passed unanimously: -
"RESOLVED THAT pursuant to the provisions of section 179 (3) (e) and subject to limit envisaged under Section 186 read with rule 11 of companies (Meetings of Board and its Powers) Rules, 2014 of the Companies Act, 2013 the consent of the Board be and is hereby accorded to invest surplus funds upto Rs. ——– lacs (Rupees ———— Lacs Only) at any one time."
"RESOLVED FURTHER THAT Mr. ————— (DIN: ——-) and Mrs. ———– (DIN: ———), Directors of the Company either jointly or severally be and are hereby authorized to do all such other things, acts and deeds etc. as may be required to comply with all formalities in this regard."
5. TO GRANT LOAN:-
The Chairperson informed the Board that pursuant to the provisions of section 179 (3)(f) and other applicable provisions if any of the Companies Act 2013, (including any statutory modification or re-enactment thereof for the time being enforce) and subject to such approvals, consents, sanctions and permissions of the appropriate authorities, departments or bodies as may be necessary, the Company may grant loan of Rs. ——— Lacs (Rupees ———— Lacs Only) in aggregate to employees. The approval of the Board is to be accorded in accordance with section 179(3) of Companies Act, 2013.
After Discussion the following resolution was passed unanimously: -
"RESOLVED THAT pursuant to the provisions of section 179 (3) (f) and other applicable provisions if any of the Companies act 2013, (including any statutory modification or re-enactment thereof for the time being enforce) and subject to such approvals, consents, sanctions and permissions of the appropriate authorities, departments or bodies as may be necessary, the Company be and is hereby authorized to grant loans of Rs. ——— Lacs (Rupees —————- Only) in aggregate to employees on such terms and conditions as may be decided from time to time."
"RESOLVED FURTHER Mr. ————— (DIN: ——-) and Mrs. ———– (DIN: ———) Mr. ————— (DIN: ——-) and Mrs. ———– (DIN: ———), Directors of the Company either jointly or severally be and are hereby authorized do take such steps as may be necessary for obtaining approvals, statutory, contractual or otherwise, in relation to the above and to settle all matters arising out of and incidental thereto and sign and execute all deeds, applications, documents and writings that may be required, on behalf of the Company and generally to do all acts, deeds, things etc. as may be required to comply with all formalities in this regard for the purpose of giving effect to the aforesaid Resolution."
Procedure for Appointment Of MD For Private Limited Company
CS Divesh Goyal
Procedure & Requirement Of Appointment Of Managing Director (MD) For Private Limited Company
Appointment of Managing Director, Whole- Time Director OR Manager (Section: 196):
This Section is applicable on Both Private as well as Public companies. Only this section of Chapter-XIII applicable on Private Companies. At the time of practical working on this section, some points create difficulties, because for appointment of Managerial Personnel company have to comply with provisions of Section- 196 and have to leave all other sections of this chapter.
MY OPINION: As per Law, there is no compulsion for private company to appoint MD, WTD and Manager. As per Act Private Company can be in continue working without MD, WTD and manager throughout the life of company.
But problems arise when Private company appoint any Managerial Personnel willingly. Then company requires following Section: 196 of CA-2013.
SECTION- 196:
- A company can appoint either Managing Director or Manager not both {Sub – section (1)}.
- MD, WTD and Manager can be appoint for maximum tenure of 5 years. But company may reappoint them for next term of 5 Years or lesser period, before expiry of existing term.
- But re-appointment cannot be done earlier than one year before expiry of the term. This means, company may re-appoint them for next term in last one year of current term.
- The minimum age for appointment for these positions is twenty – one years and normal retirement age is seventy years. (So the person who does not attain age of 21 year can't appoint as Managerial Personnel).
- But a person who has attained age of 70 year can be appoint as Managerial Personnel, by passing of Special Resolution in General Meeting, Condition: Explanatory Statement justifying such appointment shall be annexed to the notice of General Meeting for motion of appointment.
- For appointment of a person who has attained age of 70 year following procedure:
- Call a Board Meeting
- Issue notice of General Meeting
- Pass Special Resolution In General Meeting.
- File MGT-14 with ROC within 30 days of passing of Resolution.
- File form DIR-12 and MR-1 with ROC with in 30 days of passing of resolution of appointment.
- To appoint a person as Managerial personnel:
- Appointee should not be an un-discharged insolvent nor has any time been adjudged as an insolvent.
- Appointee has not any time suspended payment to his creditors or has made a composition with them.
- Appointee should not be a convict of an offence and sentenced for a period of more than six months. {Sub – section (3)
APPOINTMENT OF MANAGERIAL PERSONNEL:-
For appointment of Managerial Personnel in private company we have to do following things:
- Require to pass Board Resolution.
- Require approval of Share Holders in General Meeting.
- Follow the provisions of Schedule – V of Companies Act, 2013. (If there is any variance to the conditions specified in the schedule, this appointment shall also be subject to the approval of the Central Government. {Sub – section (3)})
PROCEDURE FOR APPOINTMENT OF MANAGERIAL PERSONNEL IF COMPANY HAS ADEQUATE PROFIT:
a. Issue Notice for Calling Board Meeting. Notice shall include:
- Terms and conditions of such appointment.
- Remuneration payable to such Managerial Personnel.
- Interest of Directors in such appointment.
b. Documents Require from Appointee:
- Declaration that he is not disqualified to appoint as director. (Secion-152(4).
- Consent that he is willing to appoint as director.(Section-152(5).
- Consent that he is willing to appoint as Managing Director.
c. Pass Resolution in Meeting for appointment of Managerial Personnel.
d. File Form MGT-14 within 30 days of passing of resolution. (Secion-179)
e. File Form DIR-12 within 30 days of passing of resolution.
f. File Form MR-1 within 60 days of passing of resolution. (Section-196).
g. GM; which will help after this appointment, Take Approval of Shareholders by passing of resolution.
DRAFT FORMATS ATTACHED BELOW:
- Notice Calling Board Meeting.
- Agenda of Board Meeting.
- Attendance Sheet of Board Meeting.
- Leave of Absence, if require.
- Declaration under section 152(4)
- Consent under section 152(5)
- Consent to act as Managerial Personnel.
- Draft MD Agreement, if require.
- Draft Board Meeting Resolution.
- Will explain in my next article Process of filling, filing and attachments of form MR-1.
FAQ'S:
- Is it mandatory to file the return of appointment of Managerial Personnel appointed in terms of Section 196?
Ans. Yes – it is mandatory for a company to file a return of appointment of a managing director, whole time director or manager, chief executive officer, company secretary and Chief Financial officer in Form no. MR.1 as prescribed in Rule 3 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Further, particulars of appointment of Managerial Personnel and any change among them are also required to be filed in Form DIR-12.
- Can a company have two Managing Directors?
Ans: As per third proviso to section 203 of the COMPANIES ACT, 2013 a company may appoint or employ a person as its MD, if he is the MD or Manager of one and not more than one other company with the consent of all directors present at meeting.
- Will Provisions of Section- 197 applicable on Private Companies?
Ans. No, the provision of Seciton-197 will not applicable on private companies. For appointment of managerial personnel private company require to follow section-196, but there is no need to follow section-197 for remuneration to managerial personnel.
4. Will Managerial personnel appointed under section 196, treated as KMP?
Ans. No, Managerial Personnel will not be treated as KMP.
Section: 203 talks about KMP and this section not applicable on Private Companies. So if a private company appoints any managerial personnel there Is no need to follow provisions of section-203.
5. If any existing director is interested director in pursuance to appointment of Managerial Personnel, so can he participate in this resolution?
Ans: No, Existing Director can't participate in this resolution, As per Section-184 of Companies Act, 2013. Such interested director have to disclose before the meeting his interest.
CONCLUSION: As per Companies Act-2013 there is no compulsion to appoint MD/WTD/MANAGER. But some companies Appoint MD/WTD/MANAGER. So Private companies can appoint MD/WTD/ Manager as per process given above. In Companies Act-2013 process is lengthy but it's not as difficult. It's just require assistance of Professionals like Company Secretary or Charted Accountant. Because there is heavy penalty under Companies Act-2013. So its my request from all professionals and businessman be careful while working under companies Act-2013.
(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)
Specific funds received by a Society of Anesthesiologists to fulfil specific objects were capital receipts
August 8, 2014[2014] 47 taxmann.com 183 (Chennai - Trib.)
IT: Contribution towards specific funds of a society created for fulfilling specific objective, would be capital in nature
HYDERABAD, AUG 08, 2014: THE issue before the Bench is - Whether when the assessee has paid advance tax in certain financial years but chooses not to file returns for many years, the income of the years for which no returns were filed, partakes the character of undisclosed income. And the answer is YES.
Facts of the case
The assessee, is an individual, whose premises was searched for the preceding ten years. During block assessment, it was found that the assessees had paid advance tax for some assessment years, but did not file returns. The AO held the income for the corresponding years for which the returns were not filed partakes the character of undisclosed income and accordingly tax was levied. On appeal against the orders of AO, the Tribunal accepted the contention of the assesseess that failure to file a return by the assessee, who paid the advance tax, cannot lead to a situation of treating the income as the undisclosed one. Reliance was placed upon an order passed by itself in relation to another case. On certain other aspects, the Tribunal rejected the contention of the assessees.
Before HC, the Revenue's counsel had urged that the failure to file income tax return may itself lead to the conclusion of non-disclosure of income for the corresponding year and mere payment of the advance tax does not change the situation. Reliance was also placed upon the recent judgment of SC in CIT v. B.R.Shah and others 2013-TIOL-04-SC-IT-LB. In the block assessment undertaken against the assessees, Revenue had noticed the manner in which the income for a year as regards which the returns were not filed, must be treated. The assessees appeared to had remained a bit complacent on the ground that they had already paid the advance tax. The payment of advance tax by itself does not absolve the obligation of an assessee to file returns. It was only when a return was filed, that an AO would be in a position to examine the details of income, expenditure and deductible incomes etc.
Held that,
++ there existed some lack of clarity in law on this aspect, when the Tribunal decided the matter. That ambiguity is set at rest with the judgment of the SC in B.R. Shahs case. Their Lordships held that payment of advance tax does not absolve an assessee from an obligation to file return disclosing total income for the relevant assessment year. The consequences would be that income for that year would be treated as an undisclosed one. On this short point, the appeals deserve to be allowed. However, allowing of appeals would not put the controversy at rest. The other details have to be worked out. It is too well known that even where a block assessment is made under Chapter XIVB of the Act, the assessment must be made as if it is an ordinary one. Section 158BH of the Act mandates this. Remand becomes necessary for working out the details;
++ while accepting the contention of the assessee as regards the manner in which the income for a year for which no declaration was filed even after paying the advance tax, the Tribunal rejected the contention of the assessee on certain other aspects. Once we feel it appropriate to remand the matter to the Tribunal, it is essential that the remand is on all the controversies or issues. It is difficult to segregate the issues or to treat the findings on them as final. It is not uncommon that the finding on one issue would have its impact on the other. Now that the view taken by the Tribunal on an important aspect is not found to be correct, the remaining issues also must be examined afresh. We, therefore, allow the appeals and set aside the respective orders under appeals. The matters are remanded to the Tribunal for fresh consideration and disposal on every aspect that is urged before it, duly giving opportunity to both the parties. There shall be no order as to costs. The miscellaneous petitions, if any, filed in these appeals shall stand disposed of.
Commission paid to director for furnishing personal surety against loan sanctioned to Co. was allowable
August 8, 2014[2014] 47 taxmann.com 141 (Delhi)
IT : Commission paid to directors in consideration of personal surety given to bank for facilitating loan, is allowable as deduction in hands of company
HC orders special audit of 'DLF' as its accounts were incomplete and complexdue to multiple sale transactions
August 8, 2014[2014] 47 taxmann.com 159 (Delhi)
IT : Where accounts did not contain narration of some entries and assessee failed to submit comparative details of expenditure in SEZ and non-SEZ units and affairs of company were not transparent, direction for special audit required
Aug 062014
Abstract……..(Plain text)……
Simpkins School Versus Director General of Income Tax (Investigation) And Others – Income Tax – ALLAHABAD HIGH COURT – HC – Exemption u/s 10(23C)(vi) – Requirement of approval under Rule 2BC – Gross receipts to be lower than Rupees one crore – Held that:- In American Hotel & Lodging Association, Educational Institute Vs. Central Board of Direct Taxes [2008 (5) TMI 17 - SUPREME COURT OF INDIA] it has been held that the petitioner society is running an educational institution – Merely because there are other objects of the society does not mean that the educational institution is not existing solely for educational purpose – The emphasis of the word solely is in relation to the educational institution, which is running not for the purpose of making profit and is not in relation to the objects of the society – the authority is required to consider the nature and genuineness of the activities – mere existence that there is some profit does not disqualify the petitioner if the sole purpose of existence was not profit making but educational activities – the threshold conditions are actual existence of an educational institution and approval of the prescribed authority for which every applicant has to move an application in the standardized form in terms of the first proviso – Director General of Income Tax (Investigation) had misdirected itself in not considering the conditions mentioned u/s 10(23C)(vi) of the Act – the order of the DGIT(Investigation) is set aside – Decided in favour of assessee. – 2014 (8) TMI 172 – ALLAHABAD HIGH COURT – TMI – Civil Misc. Writ Petition (Tax) No. 937 of 2011 – - Dated:- 4-8-2014 – Hon'ble Tarun Agarwala And Hon'ble Dr. Satish Chandra,JJ. ORDER (Per: Tarun Agarwala, J.) The petitioner is a society duly registered under the Societies Registration Act since 1982 and is running an educational institution known as Simpkins School at Agra. The petitioner has been enjoying exemption under Section 10(22) of the Income Tax Act, 1961 (hereinafter referred to as the Act) upto the assessment year 1998-99. By Finance Act No.2 of 1998 w.e.f. 1st April, 1999 Section (22) of the Act was omitted and an analogous provision Section 10(23C)(vi) was brought into existence with effect from the same date. Under Rule 2BC of the Income Tax Rules if the gross receipts are below ₹ 1 crore, approval is not required but if the gross receipts exceeds ₹ 1 crore, approval is required to be taken under Section 10(23C)(vi). The petitioner contends that even after coming into existence the provision of Section 10(23C)(vi) of the Act, the gross receipts for the assessment year 1998-99 till assessment year 2002-03, being less than ₹ 1 crore, the petitioner did not apply for approval. Since its gross receipts exceeded ₹ 1 crore in the assessment year 2003-04, the petitioner applied for approval of exemption before the Commissioner of Income Tax, Agra by moving an application in the prescribed form 56-D under Rule 2CA on 22nd March, 2003 praying for exemption under Section 10(23C)(vi) of the Act for the assessment year 2003-04 and 2004-05. Another application was filed on 31st May, 2006 before the Director General of Income Tax (Investigation), Lucknow for the assessment year 2004-05, 2005-06, 2006-07. This application was filed before the Director General of Income Tax (Investigation), Lucknow on the ground that the jurisdiction of the petitioner was centralized in the year 2004 in the wake of search and seizure action under Section 132(1) of the Act. Another application before the same authority was filed on 27th March, 2007 for the assessment year 2007-08. Another application was filed on 31st March, 2009 before the Chief Commissioner of Income Tax for the assessment year 2007-08, 2008-09 and 2009-10, which was moved through the Commissioner of Income Tax, Central, Kanpur. All the aforesaid applications for approval of exemption for the assessment years 2003-04 upto 2009-10 remained pending. For the assessment year 2010-11, the petitioner filed an application dated 24th March, 2010 before the Director General of Income Tax (Investigation), Lucknow for exemption under Section 10(23C)(vi) of the Act. This application was rejected by the impugned order dated 31st March, 2011. The Director General of Income Tax in its order held that the application for exemption for the assessment year 2003-04 upto 2008-09 was not before him and, therefore, no orders on such application could be passed. On merits, the authority held after perusal of the records found that there was a trend of rising expenditure from the assessment year 2003-04 to 2010-11 and that income was being derived from earning from plying of buses and, therefore, the society was not existing solely for educational purpose. The authority further found that the society was also earning for the purpose of profit for which certain commercial activities were being conducted. These findings were based upon perusal of the assessment orders passed by the Assessing Officer for previous assessment years. The authority further held that the appellate orders of the Commissioner of Income Tax (Appeals) granting exemption for the assessment year 1999-00 to 2002-03 was not applicable to the facts and circumstances of the case. The petitioner, being aggrieved, has filed the present writ petition praying not only for the quashing of the order passed by the Director General of Income Tax (Investigation), Lucknow but has also prayed for a writ of mandamus commanding the Direction General of Income Tax (Investigation) to grant approval to the petitioner under Section 10(23C)(vi) of the Act and further prayed that a writ of mandamus should be issued holding that the applications dated 22nd March, 2003, 31st May, 2006, 27th March, 2007, 31st March, 2009 under Section 10(23C)(vi) of the Act for the assessment years 2003-04 to 2009-10 are deemed to have been sanctioned/approved under the 9th proviso to Section 10(23C)(vi) of the Act, which has been inserted by the Tax Laws Amendment Act, 2006 w.e.f. 1st April, 2006. The respondents in the counter affidavit has contended that the application was rightly rejected and other applications for the assessment year 2003-04 to 2009-10 was filed before the authorities other than the prescribed authority and, Consequently, no orders were passed on these applications. Having heard Sri V.B. Upadhya, the learned Senior Counsel assisted by Sri R.P. Shukla and Sri Dinesh Tiwari, the learned counsel for the petitioner and Sri Sambhoo Chopra, the learned counsel for the Department, we find that the impugned order has been passed on irrelevant consideration without considering the case law on the subject. In order to appreciate the submission of the learned counsel for the parties and the findings given in the impugned order, it would be relevant to peruse the relevant provision section 10(23C)(vi) of the Act, which is extracted hereunder: " Section 10:- In computing the total income of a previous year of any person, any income falling within any of the following causes shall not be included – ** ** ** (23C)(vi):- Any income received any any person on behalf of – (i) to (v)** ** ** (vi) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved by the prescribed authority. The First, second, third, thirteenth and fourteenth Proviso of Section 10 (23C) reads as under: "First Proviso: – Provided that the fund or trust or institution [or any university or other educational institution or any hospital or other medical institution] referred to in sub-clause (iv) or sub-clause (v) [or sub-clause (vi) or sub-clause (via) shall make an application in the prescribed form and manner to the prescribed authority for the purpose of grant of the exemption, or continuance thereof, under sub-clause (iv) or sub-clause (v) [or sub-clause (via)]: Second Proviso: – Provided further that the prescribed authority, before approving any fund or trust or institution or any hospital or other medial institution, under sub-clause (iv) or sub-clause (vi) or sub-clause (via), may call for such documents (including audited annual accounts) or information from the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, as it thinks necessary in order to satisfy itself about the genuineness of the activities of such fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, and the hospital or other medical institution, as the case may be, and the prescribed authority may also make such inquiries as it deems necessary in this behalf:] Third Proviso: – Provided also that the fund or trust or institution [or any university or other educational institution or any hospital or other medical institution] referred to in sub-clause (iv) or sub-clause (v) [ or sub-clause (vi) or sub-clause (via)]. Thirteenth Proviso: – Provided also that where the fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) is notified by the Central Government [or is approved by the prescribed authority, as the case may be,] or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), is approved by the prescribed authority and subsequently that Government or the prescribed authority is satisfied that- (i) such fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not – (A) applied its income in accordance with the provisions contained in clause (a) of the third proviso; or (B) invested or deposited its funds in accordance with the provisions contained in clause (b) of the third proviso; or (ii) the activities of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution – (A) are not genuine; or (B) are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved, it may at at any time after giving a reasonable opportunity of showing cause against the proposed action to the concerned fund or institution or trust or any university or other educational institution or any hospital or other medical institution, rescind the notification or, by order, withdraw the approval, as the case may be, and forward a copy of the order rescinding the notification or withdrawing the approval to such fund or institution or trust or any university or other educational institution or any hospital or other medical institution and to the Assessing Officer:] Fourteenth Proviso: – [Provided also that in case the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in the first proviso makes an application on or after the 1st day of June, 2006 for the purposes of grant of exemption or continuance thereof, such application shall be [made on or before the 30th day of September of the relevant assessment year] from which the exemption is sought:]." The Supreme Court in American Hotel & Lodging Association, Educational Institute Vs. Central Board of Direct Taxes, 2008 (301) ITR 86 analysed the aforesaid provisions and, while setting aside the order and remitting the matter back for afresh consideration clarified that if the petitioner fulfils the threshold conditions of the actual existence of an educational institution under Section 10(23C)(vi) of the Act, the authority could not reject the application. The Supreme Court found that the second proviso lays down the powers and duties of the prescribed authority for vetting an application for approval and that the prescribed authority was empowered to call for the documents including annual accounts or information to check the genuineness of the activities of the institution. Under the third proviso, the prescribed authority, while judging the genuineness of the activities of the applicant was required to ascertain whether the applicant applies its income wholly and exclusively for the objects for which it was constituted or established. The Supreme Court held that there was a difference between stipulation of the conditions and compliance therewith. The threshold conditions are the actual existence of an educational institution and approval of the prescribed authority. It is only if the pre-conditions of the actual existence of an educational institution is fulfilled that the question of compliance with the stipulations set out in………………ALLAHABAD HIGH COURT - Income Tax
Exemption u/s 10(23C)(vi) – Requirement of approval under Rule 2BC – Gross receipts to be lower than Rupees one crore – Held that:- In American Hotel & Lodging Association, Educational Institute Vs. Central Board of Direct TaxesSUPREME COURT OF INDIA] it has been held that the petitioner society is running an educational institution - Merely because there are other objects of the society does not mean that the educational institution is not existing solely for educational purpose - The emphasis of the word "solely" is in relation to the educational institution, which is running not for the purpose of making profit and is not in relation to the objects of the society - the authority is required to consider the nature and genuineness of the activities - mere existence that there is some profit does not disqualify the petitioner if the sole purpose of existence was not profit making but educational activities - the threshold conditions are actual existence of an educational institution and approval of the prescribed authority for which every applicant has to move an application in the standardized form in terms of the first proviso - Director General of Income Tax (Investigation) had misdirected itself in not considering the conditions mentioned u/s 10(23C)(vi) of the Act – the order of the DGIT(Investigation) is set aside – Decided in favour of assessee.
Allowance for exp. or depreciation wasn't admissible if assessee transferred its business to franchisee
August 8, 2014[2014] 47 taxmann.com 211 (Punjab & Haryana)
IT: Where assessee had transferred its business to franchisee, assessee could no more claim any business expenditure or depreciation on expenses incurred by it
License fee paid by 'ITC Hotels' for using courtyard of palace for its business was allowable as revenue exp.
August 8, 2014[2014] 47 taxmann.com 215 (Karnataka)
IT : Licence fee for using courtyard of a palace while running hotel in palace, is allowable revenue expenditure
IT : Income from foreign exchange fluctuations, insurance claim, interest in KEB deposits and sale of scrap could not be treated as profit and gains of an industrial undertaking under section 80-IA
IT : Question whether deduction under section 80HHD cannot be allowed on entire business as a whole but in respect of each eligible unit, was directed to be decided on disposal of pending SLP before Supreme Court
Consultant doesn't impart any experience to client when he renders consultancy services; not to be treated as royalty
August 8, 2014[2014] 48 taxmann.com 148 (Mumbai - Trib.)
IT/ILT : The royalty payment received as consideration for information concerning industrial, commercial, scientific experience alludes to the concept of knowhow. There is an element of imparting of knowhow to the other, so that the other person can use or has right to use such knowhow. In case of industrial, commercial and scientific experience, if services are being rendered simply as an advisory or consultancy, then it cannot be termed as "royalty", because the advisor or consultant is not imparting his skill or experience to other, but rendering his services from his own knowhow and experience. All that he imparts is a conclusion or solution that draws from his own experience. If there is no "alienation" or the "use of" or the "right to use of" any knowhow i.e., there is no imparting or transfer of any knowledge, experience or skill or knowhow, then it cannot be termed as "royalty" within the meaning of Article 12 of India-Thailand DTAA
Editor's Note: The DTAA between India and Thailand does not include any provision for taxability of Fees for Technical Services
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ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))--PRINT AND ONLINE EDITION
Business expenditure --Allowance of expenditure in ratio of domestic turnover to global turnover--Indirect expenditure as reflected in assessee’s global audited accounts legally firm basis for applying it to Indian operations--No need for production of vouchers--Income-tax Act, 1961--Double Taxation Avoidance Agreement between India and Mauritius, art. 7(3)-- Renoir Consulting Ltd . v. Deputy DIT (International Taxation) (Mumbai) . . . 137
----Non-resident--Head office expenses--Disallowance of salary expenses in view of section 44C--Section 44C not applicable in view of Circular No. 333--Income-tax Act, 1961, ss. 40(a)(iii), 44C--Circular No. 333 of 1982, dated 2-4-1982-- Renoir Consulting Ltd. v. Deputy DIT (International Taxation) (Mumbai) . . . 137
Deduction of tax at source --Payment to doctors--Payees income-tax assessees having permanent account numbers and payments accounted for in their books of account--Assessee not in default--Income-tax Act, 1961, s. 201(1), (1A)-- Deputy CIT v. Quality Care India Ltd. (Hyd) . . . 121
----Salary or professional fee--Remuneration to consulting doctors--Appointment of doctors is contract for service and not contract of service--Service of doctors a professional service--No employer-employee relationship between assessee and professionals--Tax to be deducted at source from payment to doctors as professional fees under section 194J not salary under section 192(1)--Assessee not in default--Income-tax Act, 1961, ss. 192(1), 194J, 201-- Deputy CIT v. Quality Care India Ltd. (Hyd) . . . 121
Non-resident --Taxability in India--Permanent establishment--Frequent visits of principal consultants--Regular meeting of steering committee--Communications between assessee and head office in India--Regular interviews, interactions, meetings, training sessions and seminars in India--Inference of existence of permanent establishment in India--Assessee liable to tax in India--Income-tax Act, 1961--Double Taxation Avoidance Agreement between India and Mauritius, art. 5-- Renoir Consulting Ltd. v. Deputy DIT (International Taxation) (Mumbai) . . . 137
Assessment --Valuation of stock--No proper valuation by Assessing Officer--Failure on Department to bring evidence to prove sales conducted outside books of account--Addition to be deleted--Income-tax Act, 1961-- Safari Bikes Ltd. v. Joint CIT (OSD) (Chandigarh) . . . 665
Business expenditure --Capital or revenue expenditure--Film producer--Films not doing well in theatres--Assessee making payments to compensate for loss--Failure by assessee to prove that payments received by persons who suffered losses--Assessee not proving genuineness of payment--Payment capital in nature--Not allowable under section 37--Income-tax Act, 1961, s. 37-- Asst. CIT v. Seven Arts Films (Chennai) . . . 694
----Expenditure on wages--Duplication of attendance cards--Assessee failing to give full explanation for workers leaving job--Inflation of salary and wages not ruled out--Disallowance of expenditure to partial extent--Income-tax Act, 1961-- Safari Bikes Ltd. v. Joint CIT (OSD) (Chandigarh) . . . 665
Capital or revenue expenditure --Assessee running chain of restaurants--Legal expenses incurred on consultancy for acquisition of “brand†related to food business--Expenditure with respect to existing line of business--Revenue expenditure--Income-tax Act, 1961-- Deputy CIT v. Pan India Food Solutions P. Ltd. (Mumbai) . . . 630
Capital or revenue receipt --Receipt on sale of carbon credits--Capital receipt--Income-tax Act, 1961-- Deputy CIT v. My Home Power Ltd. (Hyd) . . . 731
----Subsidy from Government to export-oriented unit for installation of plant and machinery--Capital receipt--Income-tax Act, 1961-- Safari Bikes Ltd. v. Joint CIT (OSD) (Chandigarh) . . . 665
Charitable purpose --Computation of income--Adjustment of carried forward unabsorbed depreciation and deficit against income of subsequent year--To be allowed--Income-tax Act, 1961-- Addl. DIT (Exemption) v. Sri Shanmukhananda Fine Arts and Sangeetha Sabha (Mumbai) . . . 639
----Registration of trusts--Exemption--Cancellation of registration set aside by Tribunal--Trust entitled to exemption under section 11--Exemption cannot be denied on ground appeal against order of Tribunal pending before High Court--Income-tax Act, 1961, ss. 11, 12A-- Addl. DIT (Exemption) v. Sri Shanmukhananda Fine Arts and Sangeetha Sabha (Mumbai) . . . 639
Export --Exemption--Telecommunication charges and foreign currency excluded from export turnover--To be excluded from total turnover--Income-tax Act, 1961, s. 10A-- July Systems and Technologies P. Ltd. v. ITO (Bangalore) . . . 643
Industrial undertaking --Special deduction--Infrastructure facility--Income from sale of water to cargo ships for cleaning engines--Part of activity of operation and maintenance of port--Deductible--Income from storage facility and transportation charges--Not part of infrastructure facility development by assessee at port--Not deductible--Income-tax Act, 1961, s. 80-IA-- Dahej Harbour and Infrastructure Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 634
International transactions --Arm’s length price--Determination--Segregating activities into different segments and computing arm’s length price separately--Trading in spare parts closely inter-linked with manufacturing segment --Assessee and comparable companies at par with regard to nature and scale of combined activities--No need for segregation--Income-tax Act, 1961-- Toyota Kirloskar Motor P. Ltd. v. Asst. CIT (LTU) (Bangalore) . . . 700
----Arm’s length price--Determination--Transactional net margin method--Software development services--Filters to be used in selection of comparables--Companies having turnover falling within particular range to be considered--Functionally different companies to be excluded--Profit margin of software development segment alone to be compared--Income-tax Act, 1961, s. 92CA-- July Systems and Technologies P. Ltd. v. ITO (Bangalore) . . . 643
S. 10A --Export--Exemption--Telecommunication charges and foreign currency excluded from export turnover--To be excluded from total turnover-- July Systems and Technologies P. Ltd. v. ITO (Bangalore) . . . 643
S. 11 --Charitable purposes--Registration of trusts--Exemption--Cancellation of registration set aside by Tribunal--Trust entitled to exemption under section 11--Exemption cannot be denied on ground appeal against order of Tribunal pending before High Court-- Addl. DIT (Exemption) v. Sri Shanmukhananda Fine Arts and Sangeetha Sabha (Mumbai) . . . 639
S. 12A --Charitable purposes--Registration of trusts--Exemption--Cancellation of registration set aside by Tribunal--Trust entitled to exemption under section 11--Exemption cannot be denied on ground appeal against order of Tribunal pending before High Court-- Addl. DIT (Exemption) v. Sri Shanmukhananda Fine Arts and Sangeetha Sabha (Mumbai) . . . 639
S. 37 --Business expenditure--Capital or revenue expenditure--Film producer--Films not doing well in theatres--Assessee making payments to compensate for loss--Failure by assessee to prove that payments received by persons who suffered losses--Assessee not proving genuineness of payment--Payment capital in nature--Not allowable under section 37-- Asst. CIT v. Seven Arts Films (Chennai) . . . 694
S. 80-IA --Industrial undertaking--Special deduction--Infrastructure facility--Income from sale of water to cargo ships for cleaning engines--Part of activity of operation and maintenance of port--Deductible--Income from storage facility and transportation charges--Not part of infrastructure facility development by assessee at port--Not deductible-- Dahej Harbour and Infrastructure Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 634
S. 92CA --International transactions--Arm’s length price--Determination--Transactional net margin method--Software development services--Filters to be used in selection of comparables--Companies having turnover falling within particular range to be considered--Functionally different companies to be excluded--Profit margin of software development segment alone to be compared-- July Systems and Technologies P. Ltd. v. ITO (Bangalore) . . . 643
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