01 January 0001

Direct Tax Amicus: March 2016


Under-reporting and misreporting of income - Proposed penalty regime - With the Finance Bill 2016, the penalty regime in income-tax law is proposed to undergo a major overhaul. Earlier system provided for a levy of penalty, for concealment of income or furnishing inaccurate particulars of income, of an amount between 100% to 300% of the tax sought to be evaded. The newly proposed system classifies all variations made in the income into two categories – ‘under-reporting’ and ‘misreporting’. By using the word ‘may’ in the new section the legislature seeks to retain the existing fundamental feature of penalty that it should not be levied unless the conduct of assessee has been contumacious…


Budget 2016 – Highlights

  • Corporate tax will be 25% if the company satisfies certain conditions
  • Royalty in respect of patents developed and registered in India to be taxed at the rate of 10%
  • Startups will get 100% deduction of profits in any 3 consecutive years out of first 5 years
  • Country by Country Reporting introduced
  • Equalization levy of 6% of amount received by a non-resident for services provided in relation to online advertisement, providing digital advertising space
  • Direct Tax Dispute Resolution Scheme, 2016 in relation to tax arrears
  • Introduction of deduction of 30% of the additional employee costs incurred in the course of such business for three assessment years
  • Exemption has been granted from furnishing PAN by certain non-residents


Notifications & Circulars

  • Appeals to Commissioner (Appeals) - Electronic filing introduced
  • Clarification regarding taxability of consortium members as AOP
  • TDS need not be deducted on commission paid to advertisement companies


Ratio Decidendi

  • Subsidies to reimburse cost incurred in manufacturing and selling products are profits ‘derived’ from business — Supreme Court
  • Director residing in India not sufficient to establish PE of foreign subsidiary in India — ITAT, Mumbai
  • Deduction allowable under Section 80IC though return is filed belatedly — ITAT, Delhi
  • Payment for license to distribute channels is royalty — ITAT, Delhi
  • Maintenance charges received from tenants – Whether concept of mutuality applies — ITAT, Delhi


March, 2016/Issue-20 March, 2016/Issue-20

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