“TaxsutraDatabase”, a true Income-tax research tool, is an archive of over 111300+ 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:
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We are glad to present to you the 228th edition of ‘TaxsutraDatabaseBulletin’, where we keep you updated with current trends in the tax arena!
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Expert Column
The very first direct tax proposal spelt out by the Hon'ble Finance Minister in her budget speech of 2020-21 was, “Relief to Senior Citizens”. The bill proposes to provide senior citizens exemption from filing return of income subject to fulfilment of certain conditions. In this regard, CA Anand Eriwal analyses the proposed Sec.194P for the purpose of reduction of compliance burden of senior citizens.
The author examines the conditions specified in the section and highlights that certain matters would be specified by the Government at a later stage by way of notification including the details that needs to be furnished in the declaration by the Senior Citizen to the specified bank. The author also dwells on some of the issues that may need consideration. The author ponders whether the interest income from specified bank would cover interest from savings bank or even interest from fixed deposits maintained by the Senior Citizen in that same bank would also be covered. While signing off, the author remarks “We are not sure, how the new provisions of Section 194P of the Act would be practically useful to senior citizens… However, let us hope that Section 194P would indeed be a gift to some of our Senior citizens.”
Abolition of DDT was a welcome move introduced by the Finance Act 2020 which have yielded benefits to many while also creating certain interesting issues that has crept in that needs to be addressed. In this backdrop, author Kalpesh Bafna (General Manager - Finance (Direct Tax & Strategic Initiatives), Himatsingka Seide Limited) explains the fact that how DDT on one hand proved to be a boon while on the other proved disadvantageous.
The author clarified that in the absence of details of the ultimate beneficiary, the shares would be allocated to clearing members who in turn will serve the purpose of identifying the ultimate shareholders and distributing the dividend appropriately, under the new taxation system. Author elucidates the challenges that will arise in case of these clearing members who would be required to claim the refund of TDS deducted by the companies while distributing dividend on aggregate basis, thus, blocking working capital for clearing members.
The treatment of excess application over income carried forward to future years has been a topic of debate with divergent views by various Courts. In this backdrop, the author, Mr. Manoj Kumar (Senior Partner, Manoj Kumar Mittal & Co) has elucidated the position pre and post the amendment introduced in the Finance Bill, 2021.
The author highlights that the position was settled by the SC ruling in Subros Educational Society, where it was held that excess expenditure by a trust is allowed to be set off against income of subsequent years. Remarks that the amendments in Sec. 10(23C) and Sec. 11, when read together, indicate that the Government has only amended the year of allowability of excess application of expenses over income carried forward from previous year without intending to disallow the claim. Explains that there are four sources of funds for application by a trust: (i) Corpus fund, (ii) Loan received during the year, (iii) fund accumulated out of 15% saved over a period, and (iv) pending creditors. Clarifies that post-amendment, the excess application of expenses will be allowed to be carried forward and set off “in the future years in which the amount withdrawn from corpus fund in earlier years is invested back into it.”
Click here to read the article titled “Disallowance of carried forward of excessive application of expenditure over income by FB 2021 is myth or reality”
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Key Takeaways from Handpicked Rulings
1) HC: Allows assessee's writ in order to enable to go for the Vivad se Vishwas Scheme (VsVS) – HC sets aside CIT(A)’s order dismissing assessee’s appeal, remits the appeal for fresh consideration by CIT(A), rendering the appeal ‘pending’ for assessee to be able to go for the Vivad se Vishwas Scheme (VsVS); Considers assessee’s appeal that owing to CIT(A)’s order dismissing assessee’s appeal, which besides being illegal on grounds of violation of principles of natural justice, disenables the assessee from filing an appeal under the VsVS as the appeal is no longer pending before any appellate authorities; HC accepts assessee’s plea, notes that assessee has not been provided an opportunity to rectify the formal defect of not filing a condonation of delay (of one day) and accordingly holds that the order passed by CIT(A) is in violation of principles of natural justice; Explains that “once the Appellate Authority were to find that appeal is to be dismissed on the ground that ..........Click here to read and download HC order
2) ITAT : An independent building can have a number of residential units and it will not lose the character of "one residential house" for purpose of Sec.54F – ITAT allows exemption u/s.54F, rejects lower authorities' stand that assessee was not eligible for the same as he owned more than one property; Assessee along with other family members had sold an immovable property on 20-08-2015 (AY 2016-2017) and claimed exemption u/s. 54F; AO noticed that the assessee had received a building by way of gift on 13.8.2015 and the said building consisted of ground floor, first floor and second floor accordingly, took the view that each of the unit is a separate house; CIT(A) relied on jurisdiction ITAT ruling in case of [TS-8934-ITAT-2019(Bangalore)-O] confirmed AO order and rejected the claim for deduction u/s 54F; ITAT notes that.................Click here to read and download ITAT order
3) ITAT: Allows Sec.80P benefit to Agricultural Co-operative society; Follows SC ruling in Mavilayi Co-op bank - Cochin ITAT grants Sec.80P deduction to assessee (Agricultural credit co-operative society registered under Kerala Co-operative Act) for AY 2017-18; Revenue rejected assessee’s claim of deduction u/s 80P stating that the assessee did not fulfill the primary object of credit society of providing financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities........... Click here to read and download ITAT order
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The author examines the conditions specified in the section and highlights that certain matters would be specified by the Government at a later stage by way of notification including the details that needs to be furnished in the declaration by the Senior Citizen to the specified bank. The author also dwells on some of the issues that may need consideration. The author ponders whether the interest income from specified bank would cover interest from savings bank or even interest from fixed deposits maintained by the Senior Citizen in that same bank would also be covered. While signing off, the author remarks “We are not sure, how the new provisions of Section 194P of the Act would be practically useful to senior citizens… However, let us hope that Section 194P would indeed be a gift to some of our Senior citizens.” 
The author clarified that in the absence of details of the ultimate beneficiary, the shares would be allocated to clearing members who in turn will serve the purpose of identifying the ultimate shareholders and distributing the dividend appropriately, under the new taxation system. Author elucidates the challenges that will arise in case of these clearing members who would be required to claim the refund of TDS deducted by the companies while distributing dividend on aggregate basis, thus, blocking working capital for clearing members. 
The author highlights that the position was settled by the SC ruling in Subros Educational Society, where it was held that excess expenditure by a trust is allowed to be set off against income of subsequent years. Remarks that the amendments in Sec. 10(23C) and Sec. 11, when read together, indicate that the Government has only amended the year of allowability of excess application of expenses over income carried forward from previous year without intending to disallow the claim. Explains that there are four sources of funds for application by a trust: (i) Corpus fund, (ii) Loan received during the year, (iii) fund accumulated out of 15% saved over a period, and (iv) pending creditors. Clarifies that post-amendment, the excess application of expenses will be allowed to be carried forward and set off “in the future years in which the amount withdrawn from corpus fund in earlier years is invested back into it.” 
