Issue No. 246 / September 8^th, 2021

Dear Professionals, 

We are glad to present to you the 246^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

Status of Journals Updated

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Expert Column

The term computer is not defined under the Income tax Act, however, under Information Technology Act, the function of composing and sending an email and receiving a reply qualifies as a computer. The Amritsar bench of ITAT in a recent ruling held that iPads are communicating devices and thus, not a substitute for computers, which had sparked a debate among tax professionals warranting a discussion.

In this backdrop, the author CA K Prasanna (Associate Partner, M2K Advisors LLP), this article analyses the issue and rationale of the judgement wherein ITAT applied the dominant purpose test on iPads based on the SB ruling (supra) observation and concluded that the dominant purpose is only a communicating device. The author remarks “There is apprehension about whether the dominance test must be evaluated from the taxpayer's perspective or through common parlance”. Further, on ITAT’s conclusion being based on the fact that Apple store selling iPad as an entertainment device and the fact that iPad has an IMEI number, the author views “…purpose by which the supplier market the product cannot be the determinative factor of dominant use…even if the iPad has an IMEI number, it cannot automatically become a communicating device, and it cannot displace the requirement of mobiles in our day-to-day life”. The author concludes by saying “…the gadgets are developed with multi-functional features, are pocket-friendly, and can be adapted to the consumer's requirements. Hence there is a need to interpret the law in light of the circumstances surrounding it”.

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The Black Money Act, enacted in 2015 has led to detection of several instances of undisclosed foreign income and  helped the government raise a tax demand of Rs. 8216 Cr by unearthing numerous violations. 

Mr. Ruchesh Sinha (Advocate) along with Mr. R.K. Aggarwal and Mr. Pawan Aggarwal (Chartered Accountants)  in their article explain that the term black money refers to undisclosed funds and monies on which taxes have not been paid in the light of a writ petition filed by Late. Ram Jethmalani in July 2011 which, according to them, was the trigger for introducing the law.

Considering the history, language and characteristics of the Black Money Act, and the practical scenario, they highlight certain issues that require consideration including definition of the expression ‘in which it comes to the notice of the Assessing Officer’, non-prescription of time limit to find out information about existence of assets etc. They also state that absence of the provisions for compounding and the amendment made in the PMLA Act for certain offences under the Black Money Act appears to be stringent and draconian in nature.

They conclude stating that punishment under the Black Money Act should be proportionate with the crime and also that there should be appropriate filters placed at the selection stage, to pick a case for investigation purpose, let alone the assessment, penalty and prosecution.

Click here to read the article titled “The Black Money Act – A Genesis”

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Key Takeaways from Handpicked Rulings

1) HC: Upholds CBDT’s notification extending time to issue Sec. 148 notice after March 31st, 2021 - HC dismisses assessee's writ petition against reassessment notice issued under the old regime and holds that by extension notification issued by CBDT and reaffirms its view on conditional legislation; Assessees-Individuals submits that ROI was filed for the AYs 2013-14 and on the basis of some information available initially a scrutiny was done however no concealment was found and again a notice u/s 148 has been issued on 30.06.2021, the power to issue the notice was preceded with a new provision of law and thereby Section 148 is to read with Section 148-A of the IT Act, 1961. HC refers to................Click here to read and download HC Judgment

2) ITAT: Upholds CIT revision over taxability of interest income on deposits with co-operative banks – ITAT dismisses assessee's (a co-operative society) appeal, holds that CIT was justified in exercising his powers of revision u/s.263 and directing the AO to tax interest income received  on deposits with co-operative banks; Holds that such income is neither of the nature specified in Sec.80P(2)(a)(i) nor 80P(2)(d) of the Act; Notes that CIT in his SCN referred to the decision of the Totagars Co-operative Sale Society [TS-5548-HC-2017(Karnataka)-O] for the proposition that the assessee was not entitled to deduction u/s 80P(2)(d) of the Act on the interest earned from deposits with co-operative banks and also in the light of the principles enunciated by the SC in Totgars Co-operative Sale Society [TS-5012-SC-2010-O], that in case of a society engaged in providing credit facilities to its members, income from investments made in banks does not fall within any of the categories mentioned in section 80P(2)(a) of the Act.......................Click here to read and download ITAT Order

3) ITAT: Holds conversion of agricultural land into residential stock-in-trade, is business -  Splits the profit on sale of plots developed on agricultural land into business income & capital gains; States that conversion of agricultural land into residential stock in trade of business of selling the plots of land is for earning profit; Holds that the fair market value (FMV) of the asset on the date of conversion as reduced by the cost of acquisition is required to be assessed under the head “capital gain” in the year(s) the stock-in-trade is sold or transferred; Further, observes that sales realization of the stock-in-trade over such fair market value is required to be assessed as “business income”; Accordingly, holds that taxability arising on conversion agricultural land into .......................Click here to read and download ITAT Order

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Lot's more at Taxsutra Database 

CBDT notifies Rule 9D for calculation of taxable interest on PF contributions; Prescribes monetary thresholds

CBDT issues Circular on extension of various e-filing deadlines

CBDT notifies extended timelines under Direct Tax Vivad se Vishwas Act, 2020 (3 of 2020)

Access all “Taxsutra Database Newsletters”, in case you have missed any!

Access latest News....and more! 

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