Issue No. 278 / Sep 22^nd, 2023

Dear Professionals,

We are glad to present to you the 278^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

Journals Current Status

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Expert Column 

Taxation of charitable institutions has seen a paradigm shift in the recent times due to frequent amendments. One such amendment is related to the allowability of inter-trust donation which has been introduced through the Finance Act, 2023.

Mr. Saurabh Kedia and Ms. Megha Dhandhania (Chartered Accountants) discuss the impact of the amendments related to inter-trust donations and the underlying intent to ensure effective application of income by the trusts. They further touch upon the pre-amendment provisions wherein such donations were allowed as application of income in the hands of the donor trust. The authors analyse how, after Finance Act 2023, the amount paid towards inter-trust donations shall be considered as application only to the extent of 85% of such inter-trust donation. They elaborate the effect of the amendments through illustrations capturing different scenarios. The authors also highlight the lack of clarity in the provisions which can lead to different interpretations inviting further litigation.

The authors conclude that “while the government’s efforts towards rationalising the trust’s provisions and curbing malpractices for tax avoidance are commendable, the charitable trusts are flummoxed by the plethora of amendments being introduced year on year and the lack of clarity thereon. Bringing more clarity to remove the ambiguities in the existing as well as newly inserted provisions relating to taxability of charitable trusts is the need of the hour.”

Click here to read the article, “Fate of inter-trust donations – another jigsaw in the trust taxation landscape!”

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CBDT issued Circular No. 19/2019 that mandates a computer-generated Document Identification Number (DIN) in all communications issued by the income-tax authorities on or after Oct 1, 2019 for ensuring accountability in official dealings. CBDT also laid down certain exceptions whereby manual communication without a DIN could be issued. Recently, Jharkhand High Court took a view that the delay of one day in generation of DIN was not fatal to the assessment which is contrary to Delhi High Court's judgment on this issue.

Mr. Deepak Chopra (Senior Partner, AZB & Partners), Ms. Sheetal Kandpal, (Associate) and Mr. Pulkit Pandey (Associate) critically analyse the Jharkhand High Court judgment. They apprise that while dealing with the issues of limitation and communication of the order for the purposes of quoting the DIN, the High Court made a distinction between the terms, ‘making of an order’, ‘issue of an order’, ‘uploading of an order’ and ‘communication of an order’, etc., which were often used interchangeably. They highlight that the High Court held that quoting of DIN is mandatory only for communication of an order and as Section 153(3) deals with ‘making of an order’ and not its communication, the generation of DIN would not have a bearing on the said limitation. 

Click here to read the article, “Jharkhand HC on DIN Mandate - Slip Between the Cup and the Lip”

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Key Takeaways from Handpicked Rulings 

1) HC: Trial Court appropriate forum to consider evidence; Upholds prosecution - HC dismisses Assessee’s criminal petition, upholds initiation of criminal prosecution before Special Judge for Economic Offence (Trial Court) under Section 276C(2) for allegedly deliberate and wilful evasion of payment of taxes; Observes that the Assessee has to undergo trial to prove his defence and the same cannot be considered by this court to quash the proceedings; Holds that there are no grounds to entertain the criminal petition and all the criminal petitions stands dismissed; Grants liberty to the Assessee to file application under Section 205 of CrPC seeking exemption from personal appearance during trial and directs Trial Court to consider the said application without hindrance to the trial; Observes that since the complaint pertains to the year 2018, accordingly, directs Trial Court to conclude the process of trial as expeditiously as possible within a period of six months from the date of receipt of order.………….. Click here to read and download HC Judgment copy

2) ITAT: Denies Sec. 54F benefit prerequisites not satisfied; Rejects liberal construction as neither - ITAT dismisses Assessee’s appeal, upholds CIT(A) order restricting Assessee’s Section 54F claim in respect of capital gain arising on sale of residential property during AY 2013-14 on failure to utilize the said amount in construction of residential property within 2 years and reinvesting it in non-agricultural property and non-deposit of un-utilized consideration in ‘Capital Gains Account Scheme' (CGAS) in terms of Sec 54F(4); Rejects Assessee’s contention that it failed to construct the residential premises within the stipulated time and subsequently purchased non-agricultural land, accordingly, deduction under Section 54F have to be liberally construed to grant benefit and observes that Section 54F could have liberally construed so as to accord deduction had it been the residential property, however, in the present case, the Assessee invested in non-agricultural land and the Assessee not at all deposited the money remained unutilised in construction of residential premises in CGDS, thus, the intention to invest is devoid of merit to allow claim of deduction under Section 54F; On the issue of deduction on interest paid on borrowed capital used for acquisition of the house property, ITAT observes that Section 24(b) provides for interest paid on borrowed capital used for acquisition of the house property is allowable as deduction, however, in the present case, Assessee is not able to…………Click here to read and download ITAT Order

3) ITAT: MAT credit inclusive of surcharge & cess; Follows SC ruling in K Srinivasan - ITAT allows Assessee’s claim of MAT credit under Section 115JAA(2A) inclusive of surcharge and education cess for AY 2012-13; Rejects Revenue’s order allowing MAT credit excluding surcharge and cess, disregards Revenue's reliance on Delhi ITAT ruling in Richa Global; Accepts Assessee's reliance on the SC ruling in case of K. Srinivisan wherein it was held that the term ‘tax’ includes surcharge; Relies on SC ruling in Tulsyan NEC wherein it was held that right of MAT credit gets crystallized as soon as tax in paid under MAT; Observes that there is no question of set off of the surcharge/cess as in the case of tax in absence of specific provisions in its respect, accordingly, the tax credit is to be allowed against the tax per se, paid earlier, surcharge and cess would therefore if at all, come payable only on the balance tax and no amount of tax would accordingly, suffer surcharge/cess twice…………Click here to read and download ITAT Order

4) HC: Quashes criminal proceedings alleging tax-evasion as assessment set aside on merits - HC quashes criminal prosecution against individual Assessee’s since the assessment order was set aside by the appellant authority on merits; Observes that the Revenue has not disputed that assessment order has been set aside by the appellate authority on merits and no appeal has been preferred against the appellate authorities order; Rejects Revenue’s contention that both assessment and criminal proceedings are independent and both can proceed simultaneously and observes that once assessment proceedings has attained its finality with the finding that there was no evasion of tax than continuation of criminal proceeding under Section 276C, 277 and 278E shall be without any foundation; Observes that assessment proceeding is a civil proceeding in which the burden of proof is lighter than that in a criminal case but once the Revenue fails to prove in the civil proceeding the evasion of tax, prospect of the same being proved in a criminal proceeding becomes a remote possibility and in such circumstance it will be an exercise in futility, to permit such a criminal proceeding shall be an abuse of process of court; Relies on SC rulings in K.C. Builders and Radheyshyam Kejriwal wherein the criminal proceeding was quashed while holding that the standard of proof required in criminal proceedings is higher than that required before the adjudicating authority and in case the accused is exonerated before the adjudicating authority prosecution on the same set of facts cannot be allowed and it would be unjust and an abuse of the process of the court to permit the Enforcement Directorate to continue with the criminal prosecution; Accordingly, holds that the criminal prosecution is not sustainable………….. Click here to read and download HC Judgment copy

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“Taxsutra Database”, a true Income-tax research tool, is an archive of over 124275+  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:  

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