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7/29/2019 Business Advisor - January 25, 2013 - Preview
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Volume II Part 2 January 25, 2013 1 Business Advisor
BusinessAdvisor
(Fortnightly inputs for professionals and executives)
Volume II Part 2 January 25, 2013
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Volume II Part 2 January 25, 2013 2 Business Advisor
Contents
Mandatory CSR
T. N. Pandey - All companies will have to spend 2% of average
net profit during three preceding years on CSR.
OPC: Success is doubtful
Dr S. Chandrasekaran - The concept of one person company
(OPC) was first recommended by an expert committee constituted
under the leadership of Dr J. J. Irani, in 2005.
Fragile circular on recovery of tax demands
Dr Sanjiv Agarwal - It would be fair and reasonable that no
coercive steps are taken during the pendency of stay
applications.
Where are we likely to move?
Dr B. Yerram Raju - Rational pessimism, to borrow Joseph
Stiglitzs phrase, has given way to irrational hooliganism.
Toothless GAAR
Cartoon by Bimbadhar Mishra
Case laws update
V. K. Subramani - Inter-corporate deposit written off in the first
year not eligible for deduction as bad debt.
(Cover images: Thiruvannamalai Srinivasa Perumal temple steps)
Subscriptions:http://bit.ly/ShriMagz
Disclaimer: "Management and editors do not necessarily agree with the
views of the authors in their articles and of the readers in their letters,
and of the query editors in their replies. The editors, authors and / or
publishers shall not be responsible for any kind of result generated out
of any action taken on the basis of suggestions, etc., made in any of the
write ups, interviews contained in any part of the magazine or for any
error, omission, commission to any person, whether subscriber or
otherwise. The copyright of all the materials printed herein including
articles, queries and replies etc., rests with the publishers".
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Volume II Part 2 January 25, 2013 3 Business Advisor
Mandatory CSR
T. N. Pandey
The Companies Bill, 2012 (as passed by Lok Sabha)
mandates corporates to contribute for social sectorresponsibilities. When passed by Rajya Sabha, the Bill
will be legalising a practice which is being presently
pursued by limited companies in the country concerning
social sector responsibilities as corporate social
responsibility (CSR). The Bill provides (vide clause 135)
that all companies will have to spend 2% of its average
net profit during three preceding years on CSR. The
Explanation to the clause provides that average net profit shall becalculated in accordance with the provisions of section 198 (and clause 198
of the Bill mentions the method relating to
calculation of profits).
The legal provision in nutshell
(i) The Bill provides that the new law will
apply to every company with a net worth of
Rs 500 crore or more, turnover of Rs 1,000crore or a net profit of Rs 5 crore or more
during any financial year;
(ii) The amount has to be minimum of 2%
of average profit as explained earlier.
The amount has to be spent in 9 broad areas that results in social good as
under (as given in Schedule VII to the Bill). The areas are:-
(i) eradicating extreme hunger and poverty;
(ii) promotion of education;
(iii) promoting gender equality and empowering women;
(iv) reducing child mortality and improving material health;
(v) combating human immunodeficiency virus, acquired immune deficiency
syndrome, malaria and other diseases;
(vi) ensuring environmental sustainability
(For the full issue, subscribe athttp://bit.ly/ShriMagz)
All companies will
have to spend 2% of
average net profit
during three preceding
years on CSR.
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Volume II Part 2 January 25, 2013 4 Business Advisor
Case laws update
V. K. Subramani
Once application for registration under section 12AA
has been rejected there is no provision forreconsidering the application
In Kadakkal Educational Trust v. CIT (2013) 81 DTR (Ker)
345the application of the assessee for registration under
section 12A was rejected. The assessee after rectifying the
defects submitted an application for reconsideration of
the same.
Later the assessee filed an application for approval under section 10(23C)(vi)before Chief CIT and upon which it was presumed that the assessee was not
complying/ pressing for registration under section 12A. Subsequently, the
assessee filed a writ that registration under section 12A has to be
considered by the Revenue which the court held as no longer pending.
On conclusion of such finding by the court, the assessee cannot again make
a request for reconsideration of the application for registration under section
12A.
Defect in declaration in Form No. 15G cannot lead to disallowance
under section 40(a)(ia)
In Pareek Electricals v. Asst. CIT (2013) 81 DTR (Ctk)(Trib) 342there was
some infirmity in Form No. 15G filed by the assessee which prompted the
Assessing Officer to disallow the expenditure claim by way of rent.
The tribunal held that the claim of non deduction must be considered under
the provisions of section 194-I read with section 197A of the Act.
Disallowance under section 40(a)(ia) cannot be made for the infirmity in the
declaration filed by the recipient of income.
Interest payable to co-operative bank not covered by section 43B
In CIT v. Upendra T. Kapadia (2013) 81 DTR (Bom) 279it was held that
interest payable to a co-operative bank not mentioned in the Second
Schedule of the Reserve Bank of India, 1934 nor covered by any other bank
mentioned in the Explanation to section 11(5)(iii) of the Income-tax Act, will
not lead to disallowance under section 43B of the Act.
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Volume II Part 2 January 25, 2013 5 Business Advisor
Inter-corporate deposit written off in the first year not eligible for
deduction as bad debt
In Bharti Televentures v. Addtl. CIT (2013) 81 DTR (Del) 225the assessee
made inter-corporate deposit for the first time during the year and claimed
the same as bad debt after writing off the amount in its books of account.
The court held that being the first year the inter-corporate deposit claimed
as bad debt was not a trade debt or part of any money-lending business.
Accordingly, the claim of deduction was disallowed by the court.
Amount received towards carbon credit is a capital receipt, hence not
chargeable to tax
In My Home Power Ltd v. Dy. CIT (2013) 81 DT (Hyd) (Trib) 173the assessee
received a sum towards carbon credit given to another person who had
negative point of carbon credit. It was held that the amount received was a
capital receipt and hence could not be charged to tax.
Amount in Personal Ledger Account (PLA) is deductible under section
43B
In CIT v. Maruti Suzuki Ltd (2013) 81 DTR (Del) 152it was held that the
amount shown in personal ledger account under the central excise law is
deemed to be an expenditure incurred. Such sum hence cannot besubjected to disallowance was the verdict of the tribunal and which the
court upheld as valid.
Return has to be filed before the due date under section 139(1) to be
eligible for deduction under section 10A
In Saffire Garments v. ITO (2013) 81 DTR (Rajkot) (SB) (Trib) 131 it was held
that non-filing of return within the due date prescribed under section 139(1)
would lead to denial of deduction under section 10A. The tribunal held thatthe provisions of section 10A are mandatory.
Business not in existence at the time of formation of trust cannot be
called property held under trust
In CIT v. Mehta Charitable Prajnalay Trust (2013) 81 DTR (Del) 104it was
held that a business not held at the time of formation of the trust cannot be
called property held under trust.
Thus section 11(4A) will not apply. When the business carried on by the
trust is not incidental to the achievement of the objects, it will not fall under
section 11(4) and thus it is not entitled to exemption under section 11.
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Volume II Part 2 January 25, 2013 6 Business Advisor
Actual expenditure paid to supplier for windmill is to be reckoned for
depreciation regardless of the fact that it was returned earlier by a
previous customer to the supplier
In Navlakha Translines v. ITO (2013) 81 DTR (Pune) (Trib) 103the assessee
acquired windmills from the supplier who took those windmills from a
customer who surrendered the same because of its inability to pay the cost
of windmills. In spite of the previous customer availing depreciation thereon
the assessee who acquired windmills by incurring actual cost was held as
eligible to claim depreciation. It held that the fact of previous sale and
return of such machineries by a customer will not alter the eligible
depreciation claim.
A composite housing project with eligible and ineligible units entitles
deduction under section 80-IB in respect of eligible units
In Viswas Promoters (P) Ltd v. Asst. CIT (2013) 81 DTR (Mad) 68it was held
that in a housing project consisting of eligible and non-eligible units, the
assessee could claim deduction under section 80-IB in respect of eligible
units notwithstanding non-eligible units also form part of the same project.
(V. K. Subramani is Chartered Accountant, Erode)
Budget 2013 expectations
Business Advisorinvites business
leaders and professionals to mail in
Budget 2013 expectations.
State in about 100 words what you
wish the Finance Minister should do in
the forthcoming Budget, and email
along with your photo to
dmurali [at] outlook.com.
Rush in before February 15, 2013.
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Volume II Part 2 January 25, 2013 7 Business Advisor
List of contributors to this issue
T. N. Pandey, Former Chairman, CBDT, Noida
Dr S. Chandrasekaran, Chandrasekaran Associates, Delhi
Dr Sanjiv Agarwal, Agarwal Sanjiv & Company, Jaipur
Dr B. Yerram Raju, Regional Director, PRMIA, Hyderabad
Bimbadhar Mishra, Andhra Bank, Hyderabad
V. K. Subramani, Chartered Accountant, Erode
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Volume II Part 2 January 25, 2013 8 Business Advisor
Published by:Shrinikethan, Chennai http://bit.ly/ShriMap
Edited by:D. Murali http://bit.ly/dMurali http://bit.ly/TopTalk
January 25, 2013
Business Advisor
On finance,
accounting, controls,
risk management,
taxation, and more
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