Issue No. 263 / June 27^th, 2022

Dear Professionals, 

We are glad to present to you the 263^rd edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!   

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Judicial “forward & backward reference”

1) [TS-52-SC-2008-O] / (2008) 7 DTR 0062 (SC) followed in [TS-6858-HC-2021(Kerala)-O] on income from the letting of the trucks on hire was included in the business income would not i.e., qualify for additional depreciation

2) [TS-5478-HC-2013(GUJARAT)-O] followed in [TS-5618-HC-2015(Delhi)-O] on non- deduction of TDS on reimbursement expenses

3) (2013) 358 ITR 0531 (Gujarat) / [TS-5369-HC-2013(GUJARAT)-O] followed in [TS-7045-ITAT-2020(SURAT)-O] / [TS-8238-ITAT-2021(Ahmedabad)-O] on interest income earned by the firm from FDs receipts cannot be excluded from book profit for the purpose of determining allowable deduction of remuneration paid to partners.

4) [TS-8977-ITAT-2019(Kolkata)-O] affirmed in, [TS-5271-HC-2022(Calcutta)-O] on reopening initiated based on Shah Committee Report

5) [TS-5867-ITAT-2022(Delhi)-O] followed [TS-6586-HC-2021(Delhi)-O] / (2022) 209 DTR 1 (Delhi) on  payment received by EYGSL for providing access to computer software to its member firms of EYGBS (India) does not amount to 'royalty'

6) [2021] 436 ITR 0582 (SC) applied in [TS-5258-HC-2022(GUJARAT)-O] on  Explanation - 3C to Section 43B -  Disallowance of interest on conversion into a new loan

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Expert Column 

TDS on Benefit or Perquisite was introduced through Section 194R by Finance Act, 2022 with effect from 1st July 2022. Recently, CBDT released ‘Guidelines for the removal of difficulties in the Practical Implementation of Section 194R’;

Mr. Ishu Garg (Intern, SGPM & Associates) points out that Section 194R does not cover the perquisites covered under the head of salary income u/s 17(2) and its scope is limited to the perks or benefits provided in lieu of business/ profession carried on by the recipient; In light of the CBDT guidelines, the author remarks that, “the clarification regarding out of pocket expenses is something that would need an extra attention by the taxpayer.”; Highlights that the term “any benefit or perquisite, whether convertible into money or not” widens the scope of the provisions and covers diverse nature of transactions such as medicine samples received by medical practitioners or products retained by social media influencers; The author concludes that, “CBDT is quiet on time in bringing these guidelines to reduce the challenges to be faced by the Taxpayers”;

Click here to read the article titled "Understanding Section 194R “TDS on Benefit or Perquisite" 

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Key Takeaways from Handpicked Rulings 

1) HC : Holds Benami orders, passed timely, communicated with delay as valid; Sets aside Single Judge’s order – HC Division Bench allows writ appeal, holds the orders were passed by the Benami Adjudicating Authority were within the time limit as prescribed under section 26(7) and the dates on which the certified copies were made ready and booked for despatch cannot be construed as the dates of passing of the orders under Section 26(3) was strictly within limitation period; Single Judge had allowed the writ petitions by holding the orders to be time-barred on the ground that the orders passed will take effect only from the date of communication; HC also holds that the Single Judge was not correct in entertaining the writ petitions since there was an efficacious ………….Click here to read and download HC Judgment

2) HC: Offences compoundable by DGIT even where not normally compoundable under the Guidelines - HC sets aside the DGIT’s order rejecting the compounding application for providing false information and non-cooperation during investigation; Assessee was prosecuted under Section 276C and 277 for failure to file return of income and not disclosing investment in the form of bank balance in a foreign bank account; Earlier HC had set aside DGIT’s order with a direction to dispose of the compounding application within 60 days by granting Assessee the liberty to file compounding application within 30 days; Pursuant to HC’s directions, Assessee filed a fresh application which also got rejected against which the Assessee preferred a contempt petition for non-compliance of HC’s directions; HC dismissed the contempt petition but set aside the rejection order with a direction to consider factors such as age and social status of the Assessee in the light of liberalized policy in terms of CBDT Clarification dated 14.06.2019; However, Assessee’s compounding application was again rejected; HC observes, “Guidelines issued for compounding offences ……….Click here to read and download HC Judgment

3) HC: Rejects writ against revisionary order for availability of appellate remedy before ITAT - HC dismisses Assessee’s writ petition challenging revisionary order, holds appropriate remedy would be to prefer an appeal before ITAT; Assessee, a UK-based company, was subjected to revision under Section 263 on MAT computation while Assessee’s appeal was pending before CIT(A) against the taxability of market and support services; HC observes that the power of revisionary authority extends to such matters that are not considered and decided in an appeal and that in the instant case the appeal before the CIT(A) was yet to be decided, thus, holds that there is no restriction on revisionary authority to pass an order; Opines that invocation of Section 263 by the CIT cannot be said to be without jurisdiction merely because the intimation of DIN in the order passed under Section 263 was one day after the order was passed; Refers to …..……..Click here to read and download HC Judgment

4) ITAT: Sec.40A(3) disallowance not sustainable while processing ITR since cash payment justified in TAR - ITAT directs deletion of disallowance made u/s 40A(3) in the intimation u/s 143(1); Assessee-Firm, was subjected to disallowance of Rs.1.71 Lacs while processing of return for cash payments made in excess of Rs.20,000/- in violation of Rule 6DD; ITAT notes that the Assessee in its tax audit report had given the details of cash payments in response to question and based on this information reflected in form No.3CD by the tax auditor, the CPC while processing the return had directly resorted to make disallowance u/s 40A(3); The tax auditor also gave the reason that the assessee was forced to make the payment in cash and the transaction had happened..……….. Click here to read and download ITAT Order

5) ITAT: Sec.69A addition & consequential penalty not sustainable where source of loan known to Revenue - ITAT upholds deletion of Section 69A addition, holds that the receipt of cash loan and source which is already available on record, it is not understandable how the same become undisclosed income in the hands of the assessee, as source of the same, is already within the knowledge of the IT Department; ITAT further notes that the AO has on the one hand added cash loan alleged to receipt by the assessee as unexplained cash credit as income and on the other hand, also levied penalty u/s 271D of the Act in contravention of provision of section 269SS and the CIT(A).…………..Click here to read and download ITAT Order

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About Taxsutra Database!

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 117450+  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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d)Judicial “forward & backward reference”  

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