Dear Professionals,
On February 1, 2025, Finance Minister Smt. Nirmala Sitharaman presented the Union Budget 2025 in Parliament, along with the Finance Bill 2025, which proposes amendments to tax and corporate laws. The Budget primarily focuses on boosting consumption by reducing income taxes, allowing more money to remain in the hands of average Indians. Starting April 1, individuals earning up to Rs 12 lakh will be exempt from tax, and tax slabs for various income levels have been revised. The new tax regime aims to encourage more people to shift from the old system, which had numerous exemptions. Whether taxes increase or decrease will depend on one's previous tax slab and the number of exemptions claimed. Overall, the Budget intends to leave more income in people's pockets for either spending or investing.
Click here to read and download, "The key policy changes in Direct Tax Laws and the rulings affected by the Finance Bill, 2025."
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About Taxsutra Database!
“Taxsutra Database”, a true Income-tax research tool, is an archive of over 130196+ 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.
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Dear Professionals,
We are glad to present to you the 284th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
“Taxsutra Database”, a true Income-tax research tool, is an archive of over 127520+ 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’
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Key Takeaways from Handpicked Rulings
1) HC: Holds mere incorrect mention of provisions cannot amount to discarding the addition; Confirms Sec. 68 addition - HC upholds the ITAT order confirming the addition under Section 68 towards unexplained cash deposits in the bank account; Points out that, although, the bank pass book itself cannot be treated as books of accounts, however, in the instant case, as the Assesssee already had submitted documents such as balance-sheet, profit and loss account, computation of income etc. and certainly had also maintained his own books of account in his ledger; Thus rejects Assessee’s contention that the addition made under Section 68 on the basis of bank account is not sustainable as it was made only on the basis of bank account and not on the basis of books of accounts; Notes that the Assessee failed to prove the source of income or identity / creditworthiness / genuineness of the creditors, from whom the cash loan was claimed to be obtained; Reiterates the….……. Click here to read and download HC Judgment copy
2. HC: Holds Sec. 153C notice valid, despite the satisfaction being in verbatim with searched entity’s satisfaction. HC dismisses Assessee’s writ petitions challenging Section 153C proceedings for AY 2014-15, and the order rejecting Assessee’s objections; Rejects Assessee’s contention that the satisfaction note in case of the searched person and in case of the Assessee (non-searched person) are verbatim, thus the Revenue did not apply his mind independently and merely proceeded on the satisfaction note recorded by the AO of the searched person, thus, the notice under Section 153C fails to fulfill the legal and jurisdictional requirement under Section 153C(1); Observed that, in light of the amendment in Section 153C with effect from Jun 1, 2015, the requirement is that even an information contained in the documents seized, if pertains to or relates to a person other than the searched person, the requirement of Section 153C(1) can be held to be fulfilled; Opined that, “In view of the categorical statement in the satisfaction note of the searched person forwarded by the Assessing Officer of the searched person to the Assessing Officer of the petitioner assessee, it cannot be assumed that no prima facie satisfaction of the seized material being “pertain to” the petitioner assessee could be recorded”; Thus holds that the satisfaction….……. Click here to read and download HC Judgment copy
3. ITAT: Refuses to delete Sec. 69 addition solely for erroneously mentioning wrong Section; Remits the issue. ITAT remits the issue of addition under Section 69, to the CIT(A) for consideration of the issue afresh; Opines that, “the addition cannot be deleted for the sole reason that the section under which the addition is made is mentioned erroneously and that it is necessary to look into the merits of the case”; Notes that the Revenue called upon the Assessee to submit various details to establish the source for purchase of immovable property, however as the Assessee did not furnish the requisite details such as loan confirmation, income tax returns and copy of bank account etc., Revenue treated the loan as non-genuine and made the addition under Section 69 towards the entire loan; Further notes that the CIT(A) dismisses Assessee’s appeal on the ground that the Assessee did not appear nor furnish any details to prove the genuineness of the transaction; Observes that the addition is made primarily for the reason that the assessee has not furnished details to substantiate the genuineness of the impugned transactions thereby not discharging the onus; Thus remits the issue in the interest of natural justice and fair play..….……. Click here to read and download ITAT Order
4. ITAT : Remits the issue of capital gains and Sec. 54F exemption over the dispute of quantum of jewellery sold - ITAT sets aside the CIT(A) order granting Assessee the exemption under Section 54F against the long term capital gains on sale of jewellery acquired through inheritance from her late mother-in-law; Notes that the Revenue rejected Assessee’s claim of deduction under Section 54F against the long term capital gains on sale of jewellery acquired through inheritance on the ground that there is a mismatch in the description of jewellery sold as per the wealth tax disclosure and bill of purchase obtained from the purchaser, i.e. Navarathan Jewellers; Opines that, “CIT(A) is not justified in giving the findings with regard to existence of long term capital assets in the form of jewellery acquired through the Will from Late Kasturi Shoury and consequently granting the relief which is incorrect without reconciling the quantity of jewels mentioned in the Will vis-à-vis Valuation Certificate issued by the Navarathan Jewellers”.; Thus, remits the issue of capital gains on sale of salary and exemption thereon under Section 54F to the file of CIT(A) to decide afresh; Directs the Assessee to reconcile the quantum of jewellery inherited through the will along with valuation report issued by the purchaser jewellers..….……. Click here to read and download ITAT Order
5) ITAT: Compensation received on pre-mature termination to be treated as capital receipt, not liable to tax. Followed SC in the case of Kettlewell Bullen and Delhi HC in Khanna and Annadhanam. ITAT opines that, the pre-mature termination of the assessee's agreements due to Iraq's invasion of Kuwait and the subsequent sanctions on Iraq by the United Nations which resulted in the assessee receiving compensation from the United Nations Compensation Commission cannot be said to have occurred in the normal course of the assessee's business hence considered as capital in nature. ..….……. Click here to read and download ITAT Order
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Expert Column
The Protocol signed between India and Mauritius on March 7, 2024 to amend the DTAA to include the Principal Purpose Test (PPT) clause and also to amend the preamble which is yet to be ratified and notified. The Protocol has been a subject of heated discussions due to the huge ramifications that emerge and further vindicated by the jurisprudence on treaty abuse, treaty shopping and GAAR.
Mr. Mukund Madhusudhan (Director, Taxation, Harman India) discusses the implications of the said Protocol to India – Mauritius DTAA and the amended preamble especially its interplay with the Blackstone judgment of Delhi HC, which is subjudice before Supreme Court, from a dividend perspective. The amended DTAA strives to eliminate double taxation and prevent non-taxation. Delhi HC held that benefit allowed under India-Singapore DTAA with respect to capital gains based on TRC of Blackstone and held that Revenue cannot go behind TRC to deny treaty benefits as the TRC issued by the other tax jurisdiction is sufficient evidence for claiming eligibility for DTAA benefit, residency and legal ownership. The author discusses the implications under both the scenarios – (i) if SC upholds the Delhi HC judgment (ii) if SC reverses the Delhi HC judgment. The author emphasises the all pervasiveness of PPT as it does not spare any stream of income including dividend income. Author opines that a plain reading of Article 3 of the said Protocol indicates that the amendment could be retroactive.
The author concludes, “one could ponder if the Blackstone ruling would lend any support to the taxability of dividend income at the lower rates in the hands of Mauritius entities as per the treaty, if the taxman decides to invoke the PPT (amended preamble would support this as well). In other words, is the SC’s verdict as to whether TRC is conclusive for beneficial ownership, only theoretical? Not only from a Mauritius perspective, but in the case of all treaties where a PPT has been included?"
Click here to read the article, “Blackstone Decision and Mauritius PPT – Dividend Perspective!”
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About Taxsutra Database!
“Taxsutra Database”, a true Income-tax research tool, is an archive of over 127520+ 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:
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
|
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Issue No. 277 / Aug 9th, 2023
Dear Professionals,
We are glad to present to you the 277th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
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Key Takeaways from Handpicked Rulings
1) HC: Prosecution initiated during pendency of compounding application, no sustainable - HC quashes CIT’s order sanctioning the prosecution of Assessee due to failure to deposit the tax deducted at source in time; Also directs the CIT to consider the application for compounding of offences filed by the Assessee after payment of all legitimate dues to the Income Tax Department to meet the end of justice and dispose of in accordance with law; Remarks that “since the Petitioner has come forward to compound the offence and having regard to the amount due and the precarious situation which the Petitioner Company was put to at the time of deduction of the tax and non-payment, it is inevitable to quash the CIT’s order sanctioning the prosecution”; Assessee was subjected to TDS proceedings on account of failure to deduct tax at source in time; Subsequently, CIT passed the order granting sanction to prosecute the Assessee for criminal action in terms of Section 279(1) which lead to initiation of criminal proceedings before Judicial Magistrate; Consequently, the Assessee filed the compounding application which was not considered and pending for adjudication at the time of filing of writ petition………… Click here to read and download HC Judgment
2) HC: Satisfying '300 working days' criteria in previous year not essential for Sec. 80JJAA deduction - HC sets aside ITAT order wherein benefit of deduction under Section 80JJAA was denied to the Assessee on the premise that workmen were not employed for the period of 300 days in the previous year; Relies on coordinate bench ruling in Texas Industries wherein it was held that period of 300 days could be taken into consideration both in the previous year and succeeding year for the purpose of availing benefit under Section 80JJAA and it is not required for the workmen works for 300 days in the previous year relevant to assessment year; Refers to ITAT Bangalore ruling in Bosch wherein it was held that so long as the workman employed for 300 days, even if the said period is split into two blocks, i.e. the assessment year or financial year, Assessee would be entitled to the benefit of Section 80JJAA in the next assessment year and so on so forthwith for a period of three years; Observes that post-amendment to Section 80JJAA by Finance Act, 2016 w.e.f. Apr 1, 2017 threshold of 300 days has been reduced to 240 days in case of other industries and 150 days in case of apparel industries and the second proviso to the explanation of Section 80JJAA was inserted wherein it was clarified that where an employee fulfilled the number of days criteria in the succeeding year, such employee shall be deemed to have been employed in the succeeding year and the provisions of this section would apply accordingly; Assessee-Company engaged in the business of manufacturing apparel claimed deduction under Section 80JJAA on account of employment of workmen which was denied by the Revenue on the premise that the workmen were not employed for a period of 300 days in the previous year and therefore, benefit under Section 80JJAA cannot be provided; CIT(A) dismissed Assessee’s appeal which was also upheld by ITAT…………. Click here to read and download HC Judgment
3) HC: Sets aside reassessment over non-compliance of Sec.148A; Alternate remedy no bar - HC sets aside reassessment notice under Section 148 issued on or after April 1, 2021 without complying with the provisions of Section 148A along with the consequential assessment order under Section 147 read with Section 143(3); Remits back to Revenue with a direction to consider notice under Section 148 on June 09, 2021 to be a notice under Section 148A and proceed in complying with the provisions of Section 148A in view of SC ruling in Ashish Agarwal; Observes that undisputedly the provisions under Section 148 came to be amended w.e.f., Apr. 01, 2021, however, the notice under Section 148 was issued on June 09, 2021 after the amended provision under Section 148 came into force and insertion of Section 148A which mandates the Revenue to conduct an enquiry providing opportunity of hearing before passing an order under Section 148A(d) as well as notice under Section 148; Observes that no proceedings have been initiated under Section 148A before issuance of notice under Section 148 which was also not disputed by the Revenue in its pleadings; Observes that the Revenue was duty bound to comply with the provisions of Section 148A in its words and spirit as amended section provides safeguards to the Assessee, however, the procedure as provided under Section 148A is not followed by the Revenue before issuing notice under Section 148 and the entire proceedings initiated as well as assessment order …………. Click here to read and download HC Judgment
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4) HC: Warranty Provision against sophisticated goods carrying replacement obligation allowable under Sec.37 - HC holds that no substantial question of law arises for consideration wherein ITAT held that provision of warranty would be entitled to deduction under Section 37 relying upon SC ruling in Rotork Controls; Observes that the Assessee has not committed any error in making provisions inasmuch as large number of sophisticated goods were being manufactured in the past and if the facts established show that defects existing in some of the items manufactured and sold then the provision made for warranty in respect of the army of such sophisticated goods would be entitled to deduction under Section 37; With regard to provision of liquidated damages, HC observes that since the liquidated damages provided in the accounts are based on allowances/deduction allowed by the Assessee to its customer as a part of contract and this practice is being followed by the Assessee consistently, and such debits are based on actual deduction made by the customers, accordingly, they are ascertained expenditure and allowable under Section 37; Assessee, a Government of India undertaking, engaged in the business of manufacturing, project works field return of income declaring Nil income and claimed ‘Provision for Warranty Expenses’ as business expenditure under Section 37 being contractual obligations for replacement of spare parts for certain specified period at free of cost which was disallowed by the Revenue under assessment under Section 143(3) along with disallowance of Provision for liquidated damages of Rs. 1178.42 Cr; CIT(A) allowed Assessee’s appeal; On appeal, ITAT dismissed Assessee’s appeal…………….Click here to read and download HC Judgment
5) ITAT: Addition based on Sec.132(4) statement in absence of incriminating material invalid - ITAT upholds CIT(A) order wherein addition made solely on the basis of the statement given during the course of search under Section 132(4) although subsequently retracted in absence of any incriminating material was deleted; Refers to CBDT Instruction dt. Mar 10, 2003 and CBDT Circular dt. Dec 18, 2014 wherein emphasis was supplied on gathering of evidences during the course of search and survey and to strictly avoid obtaining admission of undisclosed income under coercion and influence; Relies on ITAT Indore ruling in Ultimate Builders as well as Gujarat HC ruling in Mangarlal Chokshi wherein it was held that merely making addition only on the basis of the statement given during the course of search and without referring to any incriminating material is not justified and such addition cannot stand in the eyes of law; Rejects Revenue’s contention on admission of additional evidences under Rule 46A filed by the Assessee without granting any opportunity to its and observes that the subject addition evidences so referred to by Revenue are not related to the addition made on the basis of the statement given during the course of search under Section 132(4); Assessee was subjected to search assessment under Section 153A read with Section 153D wherein Assessee gave a statement on oath under Section 132(4) accepting unaccounted income of Rs. 2.20 Cr from AY 2016-17 although subsequently retracted stating that the disclosure ………………Click here to read and download ITAT Order
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Expert Column
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) 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.
The authors underscore that the High Court put a heavy emphasis on the word ‘may’ as contained in Section 153(3) in order to treat the limitation therein, as recommendatory in nature. They are of the view that such interpretation would render the objective of setting limitations nugatory and would make the provisions otiose.
Click here to read the article “Jharkhand HC on DIN Mandate - Slip Between the Cup and the Lip”
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About Taxsutra Database!
“Taxsutra Database”, a true Income-tax research tool, is an archive of over 123545+ 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:
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.