Issue No. 273 / March 21st, 2023 

Dear Professionals,

We are glad to present to you the 273th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

***********************

Expert Column 

Mr. Sandesh Kumar (Practice Leader, Guru & Jana) discusses the proposed amendment in Section 48 by Finance Bill, 2023 to provide that the cost of acquisition or the cost of improvement shall not include the amount of interest claimed under Section 24 or Chapter VIA. The author apprises that the objective of the proposed amendment is to prevent double deduction of interest by the taxpayers. He highlights that Section 55 already provides for plugging of double deduction in the context of ‘cost of improvement’, stating that it does not include any expenditure which is deductible in computing the income chargeable under the head Interest on securities, Income from House Property, Profits and Gains of Business or Profession, or Income from Other Sources. He points out that, contrary to its objective, the proposed amendment still gives an opportunity to claim double deduction of expenditure other than interest and double deduction of interest, which has been claimed as expenditure under Income from Other Sources and Profit and gains from Business or Profession. He is of the view that, “the taxpayers deserve a tax break in respect of post-acquisition interest while computing capital gains. Otherwise, the resultant capital gains would be an overstated number, which would be unfair from a taxpayers perspective”. 

Click here to read the article, “Budget 2023: Proposed Amendment in Cost of Acquisition”

***********************

Key Takeaways from Handpicked Rulings

1) ITAT: Rejects Sec. 80P deduction due to delay in ITR-filing; Follows SC ruling in Wipro - ITAT upholds CIT(A) disallowing Assessee’s claim of deduction under Section 80P on failure of Assessee to file return of income on or before the due date specified under Section 139(1); Holds that Assessee itself acknowledged in the return of income that it is not subjected to audit under Section 44AB and accordingly, the due date of Assesses whose books of accounts are subjected to audit does not apply; Relies on SC ruling in Wipro Limited and observes that fresh claim cannot be made by filing revised return unless there is an omission or wrong claim made in the original return; Assessee, a cooperative society filed return of income on Sep 8, 2018 for AY 2018-19 declaring income of Rs.13.95 Lac and paid tax of Rs.4.77 Lac without claiming deduction under Section 80P(2)(a)(i); Subsequently a revised return was filed by the Assessee on Nov 16, 2018 and entire income of Rs.13.95 Lac was claimed as deduction under Section 80P; CPC passed intimation order under Section 143(1) and denied deduction under Section 80P; Consequently, Assessee filed rectification application u/s 154 which was rejected by the Revenue on the premise that there is no mistake apparent on record; CIT(A) dismissed Assessee’s appeal and held that Assessee failed to furnish return of income on or before the due date specified under Section 139(1) and accordingly, deduction under Section 80P cannot be allowed; ITAT observes that …………………Click here to read and download ITAT Order

2) HC: Cash payment to dairy intermediaries attracts Sec.40A disallowance; Rule 6DD exception inapplicable - Telangana HC dismisses Assessee’s appeal, upholds disallowance under Section 40A(3) in respect of payment made in excess of Rs.20,000 to the intermediaries of dairy products; Holds that Assessee cannot be allowed the benefit of exception carved out in Rule 6DD(k) since the cash payment exceeding Rs. 20,0000 were made to an intermediary which purchases raw milk from the actual producers/farmers and process them into cream to sell it to the Assessee which in turn convert it to a marketable product for sale to ultimate consumers; Assessee-firm engaged in the business of sale of butter made cash payments exceeding Rs. 20,000 to two companies for purchase of cream i.e., dairy product and claimed exemption under Rule 6DD(f)(ii); Revenue disallowed the exemption claimed under Rule 6DD(f)(ii) and made disallowance at the rate of 20% i.e., Rs. 9.58 Lac under Section 40A(3); CIT(A) dismissed Assessee’s appeal; ITAT dismissed Assessee’s appeal and held that Rule 6DD(f)(ii) would apply only if the seller carries on the business of dairy farming, however, the two companies from which Assessee had purchased cream were not carrying on the business of dairy farming; HC observes that Rule 6DD(f)(ii) clearly stipulates that any cash payment made for the purchase of dairy products to the ‘cultivator, grower or producer’ of such dairy products are exempt and does not attract disallowance under Section 40A(3); Remarks that “these two companies are purchasers………………… Click here to read and download HC Judgment

*************************

**********************************

3) ITAT: Peak credit theory applicable as cash loan offered to tax before ITSC - ITAT partly allows Assessee’s appeal, holds that notional interest cannot be charged on the basis of loose sheets found during the course of search under Section 132 without any corroborative evidence; Adopts peak credit theory to tax the unexplained investment under Section 69 in the hands of the Assessee since the partners have offered the said advances received from Assessee as their income before the Settlement Commission; Assessee, a partnership firm was subjected to assessment on the basis of loose sheets found during search at the premises of M/s SLN Coffee P. Ltd. disclosing an amount of Rs. 5.17 Cr as cash loans/advances given to its partner; Assessee objected to the assessment on the premise that interest free loan was given to the partners on a returnable basis and the source of cash is withdrawal from the two bank accounts; Revenue rejected Assessee’s explanation and made addition under Section 69 on account of unexplained investment and on calculated notional interest income at the rate of 18% on the cash loan given to the partners; CIT(A) dismissed Assessee’s appeal; ITAT observes that Assessee’s partners have accepted the contents of the loose sheets by giving their statement’s which were recorded by the authorities; Also observes that there was no retraction of the Partner’s sworn statements and the said statements are valid till today; Observes that only the amount advanced by Assessee to these partners by way of cheque has been entered in the books of accounts and not the cash advance; Finds that reading of loose sheets in its entirety shows that transactions mentioned therein is …………………Click here to read and download ITAT Order

4) HC: Licence to develop property, not ‘grant of possession’ to constitute ‘transfer’ - HC allows Assessee’s writ petition, set aside reassessment proceedings under Section 148 and holds that a license permitting a builder to develop a property cannot be termed as ‘possession’ within the meaning of Section 53A of the Transfer of Property Act, 1882; Holds that in absence of being termed as ‘possession’, applicability of Section 2(47)(v) i.e., ‘transfer’ does not arise for the purpose of taxability as capital gain; Assessee was subjected to reassessment proceedings alleging non-reporting of capital gains for AY 2013-14 on transfer of immovable property to a developer/builder in pursuance to a development agreement; Assessee objected to the reassessment proceedings on the premise that the development agreement pertain to grant of license to developer/builder for the purpose of development and does not amount to ‘allowing the possession of the land’ as contemplated under Section 53A of the Transfer of Property Act, 1882 and therefore, Section 2(47)(v) does not apply for the purpose of chargeability as capital gain; Revenue rejected Assessee’s objections and relied on coordinate bench ruling in Dwarkadas Chaturbhujdas Kapadia wherein it was held that transfer of property under Section 2(47)(v) was complete in the year in which the builder is given irrevocable license by the land owner upon the land to carry out construction; HC relies on SC ruling in Seshasayee Steels wherein it was held that Section 53A of the Transfer of Property Act, 1882 would not be attracted in a case where a ………….Click here to read and download HC Judgment

5) ITAT: Absent specific share in sale deed, spouse taxable for notional rent as equal owner - ITAT dismisses Assessee’s appeal, affirms CIT(A) order upholding the addition of notional rent in self-occupied house property by deeming equal co-ownership of Assessee for the purpose computing annual letting value (ALV) under Section 23(1)(a) in absence of specific shareholding in the registered sale deed; Assessee-Individual was subjected to a search that revealed her co-ownership in a house property with her husband; Consequently, a show cause notice was issued to the Assessee as to why the Assessee should not be taxed under the head ‘Income from House Property’ on the notional income for AY 2011-12; Revenue treated the Assessee as equal owner on the premise that registered sale deed of the property did not define the actual share of the co-owners; CIT(A) dismissed Assessee’s appeal; Before ITAT, Assessee contended that the property is co-owned with the husband but her contribution is only limited to 5.4% of the property, therefore, taxing as equal owner was not justified; Revenue contended that ownership can only be determined as per the mutation records which clearly reflects the name of Assessee and her husband without specifying their shares; Also contended that in absence of any definite and ascertainable share of co-owners, share to the extent of 50% has to be taxed in the hands of co-owners; ITAT notes that sale deed only speaks of joint ownership of the property by the Assessee and her husband without their definite and ascertainable ……………..Click here to read and download ITAT Order

*************************

**********************************

About Taxsutra Database! 

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 121160+  Income Tax Rulings reported across ITR, CTR, Taxman, 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:   

a) Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;

b) Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;

c) Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.  

d) Judicial “forward & backward reference”  

The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.  

T: +91 95952 18026 | C:+91 93200 54016 | E: sales@taxsutra.com

Copyright © TAXSUTRA. All Rights Reserved