“Taxsutra Database”, a true Income-tax research tool, is an archive of over 112250+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR (Trib) and also includes recent ‘unreported handpicked rulings of SC, HC & ITAT’. It is a completely integrated service with the following features:
· Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;
· Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;
· Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.
· Judicial “forward & backward reference”
We are glad to present to you the 235th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
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Expert Column
Retirement planning ensures independence, and enables people to lead a life with an uncompromised standard of living after superannuation. India is yet to implement a robust social security system with retirement benefits, thus, the employees plan their retirement kitty during the tenure of employment. The major avenues for such planning are provident fund, gratuity and pension schemes. Such schemes provide considerable tax exemptions, and there have been instances wherein the top cadre employment is seen using them as an active tool for planning taxes. To dissuade these practices, the Union budget 2020 saw amendments to tax the employer's contributions towards such schemes and interest thereon in excess of specified thresholds.
Mr. Anurag Jain and Mr. Shubham Goel (Co-founders and Partners - ByTheBook Consulting LLP) discuss these amendments and the rules in the wake of practical challenges caused to employer and employee. They cover various aspects including double taxation of contribution in certain cases, ambiguity of the rules notified for interest computation and hint at possible difficulties in withholding taxes. The authors conclude with a suggestion “…it is imperative that the tax authorities bring clarifications on the working of formula under different practical scenarios/circumstances and also address the issue of potential double taxation of the same income.”
Click here to read the Article titled, “Taxability of contribution towards retiral schemes – Challenges for companies”
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Key Takeaways from Handpicked Rulings
1) HC: Dismisses Assessee`s writ; issue of income escaping assessment requires determination by AO – HC dismisses writ, states that question of escapement of income from assessment is a matter of determination by the AO based on all relevant materials and explanations; declines to interfere on the challenge to assumption of jurisdiction; In connection with a search exercise conducted at third party’s premises, Revenue provisionally attached land and building, and despite objections, did not take any action to lift the attachment, in the interim the Assessee received notices u/s 153C for a period of seven years, in response to which Assessee re-submitted returns filed for the respective years as response; Assessee states that notices issued are without jurisdiction since there is no income escaping assessment; HC holds that this is not an issue which can be looked into by writ petition, requires determination of disputed facts....................... Click here to read and download HC Judgment copy
2) ITAT: Upholds revision u/s 263, on AO’s failure to make adequate enquiry resulting in undervalued stock – ITAT upholds PCIT’s revisionary order recomputing cost of valuation sans adequate enquiry by AO, rejects Assessee’s contention that AO adopted one view out of two possible views and since the Assessee was regularly and consistently following FIFO method, the AO could have accepted the same without any further examination and verification; Assessee company was engaged in trading of iron ores, original assessment was completed u/s 143(3) determining total income at Rs.2,13,61,760/-, thereafter Assessee received show cause notice as to why the assessment order should not be cancelled / modified u/s 263, PCIT made an addition on account of undervaluation of closing stock; ITAT clarifies AO was required to make adequate enquiry to cover all possibilities of leakage of revenue, notes that there was no whisper in the assessment order regarding the issue of under valuation; States that PCIT has not disturbed the method of valuation adopted by the assessee i.e. FIFO method, but recomputed the cost, to include a bill was not considered by the AO while passing the assessment order; ITAT upholds PCIT’s order holding the assessment as erroneous and prejudicial to the interest of the Revenue and directs the AO to modify the assessment order enhancing the addition............... Click here to read and download ITAT Order
3) ITAT: Confirms addition of depreciation on goodwill representing accounting entry – ITAT confirms addition of depreciation on goodwill and other intangibles of Rs.44 Cr. arising from excess consideration paid by the Assessee in acquisition of running business for Rs.1240 Cr. whereby goodwill was recorded at Rs.792 Cr. ; ITAT is of the view that in absence of transfer and valuation of the asset, there cannot be any claim of ownership or claim of depreciation and allowing depreciation on fictional goodwill would tantamount to making profit/loss out of oneself; ITAT takes note of the valuation reports as per which the goodwill amount was only a balancing entry which in its opinion did not reflect the outcome of any due diligence procedures; Holds, "The balancing entry treated as goodwill as per accounting standards is fictional in nature in the present case and does not represent any real intangible and the accounting procedure in double entry accounting system cannot override the provisions of Income Tax Act.".............. Click here to read and download ITAT Order
4) HC: “May” as used in u/s 144B(7) does not absolve Revenue, obligated to consider request for personal hearing – HC holds that usage of 'may' u/s 144B(7) cannot absolve Revenue from obligation to consider 'personal hearing' request, sets aside faceless assessment order for denovo adjudication; Petitioner submitted that although personal hearings were sought for after issuance of show cause notice-cum-draft assessment orders at two occasions, Revenue chose not to accord the same; Referring to the Faceless Scheme contained in Sec 144B, HC remarks that "if one were to look at the relevant provisions, ...., then, one would get a sense as to why the legislature has provided a personal hearing in the matter:"; Rules that "...the usage of the word ‘may’, to our minds, cannot absolve the revenue from the obligation cast upon it, to consider the request made for grant of personal hearing. Besides this, under sub-clause (h) of Section 144B(7)(xii) read with Section 144B(7)(viii), revenue has been given the power to frame standards, procedures and processes for approving the request made for according personal hearing to an assessee who makes a request qua the same."; Upon Revenue’s counsel informing the Court that no such guidelines / standards have been framed, HC states that "given the aforesaid facts and circumstances, it was incumbent upon the Revenue to accord a personal hearing to the petitioner"..............Click here to read and download HC Judgment copy
5) HC: Upholds 14A disallowance even when no exempt income earned- HC: Upholds disallowance u/s 14A even if assessee did not earned exempt income in assessment year, quashes ITAT’s order, follows the Supreme Court as well as CBDT Circular No.5/2014 dated 11.02.2014 which clearly provides that disallowance u/s 14A of the Act read with Rule 8D has to be made even when the tax paid for a particular year is not earned in exempt income; Assessee is investment company with main object of making investments, during the year substantial investments were made using borrowed money, accordingly the interest expenditure was disallowed, on appeal to ITAT, it allowed the appeal.........Click here to read and download HC Judgment copy
6) HC: Revised submission of Form 10 at any time before the completion of assessment is valid compliance of law - HC dismisses Revenue’s appeal, allows assessee-trust’s accumulation of surplus amount to the extent of addition made by revising the Form 10 during the course of assessment proceedings............Click here to read and download HC judgment copy
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Mr. Anurag Jain and Mr. Shubham Goel (Co-founders and Partners - ByTheBook Consulting LLP) discuss these amendments and the rules in the wake of practical challenges caused to employer and employee. They cover various aspects including double taxation of contribution in certain cases, ambiguity of the rules notified for interest computation and hint at possible difficulties in withholding taxes. The authors conclude with a suggestion “…it is imperative that the tax authorities bring clarifications on the working of formula under different practical scenarios/circumstances and also address the issue of potential double taxation of the same income.” 
