We are glad to present to you the 240th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
Status of Journals Updated:
ITR - Vol 435 PART 2
12th July 2021
ITR Trib - 89 Issue 2
12th July 2021
CTR Vol - 321 Issue 25
18th June 2021
DTR Vol - 203 Issue 126
12th July 2021
TAXMAN Vol - 280 Part 2
10th July 2021
ITD VOL - 189 Issue 1
07th July 2021
TTJ VOL - 212 Issue 25
22nd June 2021
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Expert Column
As the pandemic continuing to grip the countries across the globe, its effect can be across sectors, with countries bringing about necessary legislative amendments to provide relief to affected sectors and public at large. The CBDT vide its Press Release dated 25th June 2021 announced tax exemptions in respect of amounts received for COVID-19 treatment and ex gratia amounts received in case of death, from employers and well-wishers.
As we still await legislative amendments effecting these announcements, CA M.R. Ashwini and CA T. Usha Rani in their article acquaint readers with the existing provisions and their tax implications of various amounts received by employees and their nominees / beneficiaries from the employer. They also discuss procedural compliances in terms of existing provisions and are hopeful of further clarifications from the CBDT.
To provide relief to taxpayers in view of the disruptions caused by the Covid-19 pandemic, the Government enacted “Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020” (TOLA). The TOLA seeks to enact legislative amendments in direct and indirect tax laws, which were introduced by the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (Ordinance) as a part of Covid-19 related relief measures.
CA Dindayal Dhandaria discusses the substituted provisions of Sec. 149 by Finance Act, 2021 which have reduced the time limit for re-opening of cases.The author shares his opinion as to whether by reducing the time limit for assessment or re-assessment or re-computation of income, the Department has either taken a bold step of confidence pursuant to its newly acquired technology or has granted an unintended benefit to the tax evaders. Elucidating on the new reassessment regime, the author illustrates how the amended structure of the provision is an unintended boon to certain taxpayers as there cannot be any assessment of income that would have escaped assessment after the expiry of three years. The author remarks this to be a bold step taken by the Department and states “If the Department is confident that, on the strength of its risk management strategy, technology, information-driven database, and inputs from CAG, it would capture all cases of escapement of income within a short period of 3 years from the end of the relevant assessment year, it would, undoubtedly, be a bold step”.
1) HC: Commission to director forming part of salary not disallowable u/s 36(1)(ii) - HC holds that the commission paid to the Managing Director of the Assessee company by it is a part of salary on which taxes have been deducted, thus, disallowance u/s 36(1)(ii) is not attracted; Assessee company, engaged in the business of construction and sale of residential flats and also letting of property, paid an amount of Rs. 2.66 Cr. for AY 2010-11 as commission to its Chairman and Managing Director, holding 95% of the company’s shares and receiving fixed salary and other related benefits like other employees; Revenue treated the said payment to be disallowed u/s 36(1)(ii) which was dismissed by the CIT(A) and the ITAT; HC refers to coordinate bench ruling in Assessee's own case wherein it was held that “Managing Director…in terms of the Board resolution is entitled to receive commission for services rendered to the company. It is a term of employment on the basis of which he had rendered service…Commission was treated as a part and parcel of salary and TDS has been deducted…Payment of dividend is made in terms of the Companies Act, 1956…he has offered the entire commission for taxation and paid tax at the maximum marginal rate without claiming any deduction. Therefore, motive of tax avoidance is also absent.”; Thus, HC notes that the question of law in the instant case is similar to the case law referred to, hence, it decides the matter in favour of the Assessee..............Click here to read and download HC Judgment
2) ITAT: Upholds addition of cash deposit being commission for providing accommodation entries - ITAT dismisses Assessee’s appeals for AY 2003-04 & 2004-05, upholds Revenue’s orders for making addition u/s 68 on account of cash deposits into bank account received as commission on providing accommodation entries; Assessee, being part of a group (managed by Mr. Tarun Goyal) providing accommodation entries through its various entities, was issued notice u/s 153A determining commission income in respect of all the entries given outside the group @ 2.25% disregarding claim of Mr. Goel that commission income is to be taxed @ 0.25%; Subsequently, on direction received from the ITAT to look into unexplained credit entries by the Assessee and determine the rate of commission as per the procedure, AO passed the Assessment order determining the commission income @ 2% instead; ITAT notes that the cash was received during the course of carrying on the business of accommodation entries; Observes that the Assessee failed to establish the source of deposit of cash into bank and prove the identity and creditworthiness of the alleged person from whom the cash is received and genuineness of the transaction.................Click here to read and download ITAT Order
3) HC: Deductor of tax responsible for its payment to Exchequer - HC directs Revenue to recover the balance tax which has escaped payment from the petitioner (landlord) for AY 2013-2014; The petitioner filed this petition against Revenue’s order to recover taxes on the rental income received; Claimed that when the tenant had withheld taxes from the amount paid to the petitioner but did not deposit the same with the Government, the petitioner cannot be saddled with the tax liability; HC observes that the tenants had failed to make payment of rent to the petitioner which led to adjustment of arrears with the interest free deposit; Takes note of the MoU as per which the tenant also did not remit the taxes on the payments made earlier to the petitioners; Clarifies the confusion with regard to the amount actually deducted and to be deducted and holds “If the second respondent had failed to remit the tax to the credit of the Income Tax Department, it is however open to the department to recover the same from the second respondent in the manner known to Law. Balance of tax if any, which has escaped payment alone can be recovered from the Petitioners, by issuing suitable notice under the provisions of the Income Tax Act…”......................Click here to read and download HC Judgment
4) HC: ITAT order invalid for non-granting opportunity under Rule 27 - HC holds order of ITAT invalid as passed without granting Assessee an opportunity of opposing the appeal by supporting the impugned order as per Rule 27 of the ITAT Rules,1963, thus, restores the matter for fresh adjudication;Revenue had initially dismissed the appeal as withdrawn due to low tax effect which later on was restored on realising that the same falls under the exception clause 10(c) of the Circular dated 11/07/2018; Assessee contended that the Revenue passed the assessment order without allowing Assessee the right as per Rule 27 of the ITAT Rules as well did not accept the request for adjournment made before the ITAT; HC remarks “The contention that the appellant ought to have moved the Tribunal for restoration of the proceedings cannot be accepted for the reason that the Tribunal has decided the proceedings on merits and hence the appeal challenging its decision has been rightly filed”; Finds that the opportunity of hearing was lost in the entire process, thus, the proceedings are restored for fresh adjudication in accordance....................Click here to read and download HC Judgment
5) ITAT: Revisionary Order invalid where approval u/s 153D was not subjected to revision - ITAT quashes the revisionary order passed by PCIT u/s 263 for AY 2017-18; Holds “…PCIT has no power to revise the Order under section 263 of the I.T. Act, without revising the approval of the JCIT under section 153D”; Assessee, being a shareholder in M3M India Pvt. Ltd. (MIPL) entered into an agreement for an allotment of Villa located at M3M Golf Estate and accordingly invested Rs.110.18 Cr. by making several remittances to MIPL; On non-delivery of the said Villa under the Builder Buyer Agreement, the Assessee filed a complaint before the Sole Arbitrator and was awarded a compensation of Rs. Rs. 91.33 Cr. for the subject AY which was offered by the Assessee in her ROI as capital gains; Revenue framed assessment u/s 153B r.w.s 143(3) after getting the approval of JCIT u/s 153D, on coming across these facts during search operation on the Assessee, which was subsequently considered as erroneous and prejudicial to the interests of revenue by PCIT contendingthe transaction of investment to be ‘sham’ and held the compensation received to be revenue in nature; ITAT observes that the A.O before completion of assessment had discussed the matter with the JCIT several times and remarks that order u/s 143(3) r.w.s 153B cannot be revised without revising the approval of the JCIT; Notes that PCIT................ Click here to read and download ITAT Order
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As we still await legislative amendments effecting these announcements, CA M.R. Ashwini and CA T. Usha Rani in their article acquaint readers with the existing provisions and their tax implications of various amounts received by employees and their nominees / beneficiaries from the employer. They also discuss procedural compliances in terms of existing provisions and are hopeful of further clarifications from the CBDT.
CA Dindayal Dhandaria discusses the substituted provisions of Sec. 149 by Finance Act, 2021 which have reduced the time limit for re-opening of cases.The author shares his opinion as to whether by reducing the time limit for assessment or re-assessment or re-computation of income, the Department has either taken a bold step of confidence pursuant to its newly acquired technology or has granted an unintended benefit to the tax evaders. Elucidating on the new reassessment regime, the author illustrates how the amended structure of the provision is an unintended boon to certain taxpayers as there cannot be any assessment of income that would have escaped assessment after the expiry of three years. The author remarks this to be a bold step taken by the Department and states “If the Department is confident that, on the strength of its risk management strategy, technology, information-driven database, and inputs from CAG, it would capture all cases of escapement of income within a short period of 3 years from the end of the relevant assessment year, it would, undoubtedly, be a bold step”.
