“TDS on Purchase of Goods” - All Questions Answered; CIT’s revisional powers u/s 263; Income from business of Chitties incidental……….and lot's more!
Issue No. 231 / May 11th, 2021
Dear Professionals,
“Taxsutra Database”, a true Income-tax research tool, is an archive of over 111850+ 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:
· Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;
· Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;
· Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.
· Judicial “forward & backward reference”
We are glad to present to you the 231st edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
***********************
Expert Column
The Finance Act 2021 has introduced Section 194Q providing for TDS on purchase of goods with effect from July 1, 2021. Section 194Q is similar to Section 206C(1H) which was introduced by Finance Act 2020, to collect tax at source on transactions between a buyer and a seller.
CA Manjula A (Vishnu Daya & Co LLP) has authored an article to discuss the key elements of Section 194Q such as applicability on buyers turnover exceeding INR 10 Crore, rate of deduction 0.1% of the aggregate value of the goods that exceed INR 50 Lakh and 5% in case the seller does not hold a PAN in India. Further, the author clarifies, through FAQs, who is liable to deduct tax, applicability on types of the assessee, when shall tax be deducted, whether TDS is required to be made on the entire consideration or only on the consideration that exceeds INR 50 Lakhs and TDS to deducted on various kinds of purchases etc.
The author highlights the interplay between TDS u/s 194Q and TCS u/s 206C(1H) and the comparison of both on the various aspects such as liability of payment, turnover limit, effective date, PAN requirement and exclusions etc. She illustrates the applicability of the provision on the transactions after July 01, 2021.
Click here to read the article titled, “TDS on Purchase of Goods” - All Questions Answered!
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Key Takeaways from Handpicked Rulings
1) HC: No TDS on trade discounts given to newspaper vendors - HC rules in favour of assessee [engaged in printing and publishing of newspaper] holds that no taxes are required to be deducted on trade discounts given to newspaper vendors; States that the relationship between the assessee and the newspaper vendor was on a principal-to-principal basis and therefore there was no requirement of deducting taxes on the trade discount extended to them …………….. Click here to read and download HC Judgment copy
2) HC : TDS inapplicable on interest to members by co-operative banks pre-2015 amendment – HC upholds ITAT order deleting disallowance u/s 40(a)(ia) on interest paid by assessee (co-operative bank) to its members during AY 2012-13; Revenue disallowed the interest paid on account of non-deduction of taxes u/s 194A(3)(i)(b); Assessee contented non application of provisions of Sec. 194A(1) on the income credited or paid by a co-operative society to its members, following CBDT Circular No. 9/2002 where tax needs to be deducted on payment made to non-members only; Holds that sub-section (1) of Section 194A will........... Click here to read and download HC Judgment copy
Note: HC reverses ITAT order, assessee (a co-operative society engaged in banking business) not liable to deduct TDS u/s 194A on interest paid to members for AYs 2008-09 to 2014-15
3) HC: Valuation report shall be submitted within 6 months of reference u/s 142A - HC upholds CIT(A)’s action directing AO to seek valuation report in respect of assessee’s property exercising its power u/s 251, however directs CIT(A) to consider assessee’s plea of limitation u/s 142A(6) as expeditiously as possible preferably within three months; For the AY 2015-16, Revenue issued notice u/ 142A in Oct, 2017 to assessee for valuation of property; However, Revenue passed assessment order in Dec 2017 itself, without waiting for the valuation report, against which assessee filed an appeal with CIT(A); While the appeal was pending, a fresh notice u/s 142A was issued in Oct 2020 pursuant to CIT(A)’s direction; Acknowledges assessee’s contention that as per Sec. 142A(6) valuation report............. Click here to read and download HC Judgment copy
Note: ITAT allows assessee's appeal for AY 2007-08, holds that amendment in Sec.142A cannot be said to have retrospective effect
4) HC sets aside assessment orders passed u/s 143(3) r.w.s. 153C in case of assessee-individual, directs Revenue to issue fresh notice with sufficient time being given to the assessee to put-forth his submissions on merits; Holds that the Investigation officer is empowered to make a reference to valuation officer but such report should be made available to the assessee before using the same against him; Remarks that the assessment has been completed in haste and the delay is caused due to the department in taking stock of the search material, centralizing the cases and issuing the notices..................... Click here to read and download HC Judgment copy
5) HC reverses ITAT order, upholds CIT's revisionary order over allowability of expenditure , carry forward of losses – HC upholds CIT’s revisional powers u/s 263 exercised in case of the assessee; Assessee claimed to have earned fixed deposit interest which it showed as business income against which business expense was claimed; Revenue contented that without any nexus between the income and expenses, such income should be treated under the head other sources and thus, the expenses claimed on such interest income is to be disallowed by invoking the provisions of Section 57; However, this position adopted by the Revenue was later changed and assessee’s view was accepted without application of mind; HC holds that there is no infirmity in the CIT’s exercise of revisional jurisdiction as the twin conditions.................Click here to read and download HC Judgment copy
6) ITAT : Actual sale consideration cannot be determined on basis of receipts shown in form 26AS - ITAT sets aside assessment for AY 2014-15 made based on entries in Form 26AS without verifying the sale consideration in the property sale deed; Assessee-individual, a co-owner of land, entered into an agreement with a developer for development of land for a total consideration of Rs. 4.8 Cr and the amount was reflected in assessee's Form 26AS since the developer deducted TDS on the sum; Subsequently, the MoU with the developer did not materialize and the assessee instead sold the property to an individual for a total consideration of Rs 2.7 Cr - his share being Rs. 67.5 lakhs (1/4th share in property) and claimed exemption u/s 54F; AO erroneously taxed LTCG of Rs. 6.7 Cr. instead of 67.5 lakhs on sale of land on account of failure of assessee to produce the documents/ details of sale; AO additionally taxed Rs. 4.8 Cr reflected in Form 26AS..............Click here to read and download ITAT Order
7) HC sets aside the impugned order and remands the matters to the ITAT with a direction to permit the assessees to raise the issue of compliance or non-compliance with the jurisdictional parameters necessary to initiate action u/s 153C; Holds it necessary to file cross-objections to raise a jurisdictional issue only to support the order of CIT(A) that was entirely in favor of the assessee............. Click here to read and download HC judgment
8) ITAT : Date of advance payment for new property relevant for Sec 54F exemption - ITAT holds that sale of the residential property by assessee-individual during AY 2013-14 gave rise to Long Term Capital gains, rejects Revenue’s STCG computation; Assessee owned a residential unit consisting of two floors- first floor purchased in 1989 and the second floor during 2009 and sold the entire unit during 2012; Revenue contented it to be short term capital gain for holding period being less than 36 months, however, on perusal ITAT finds that the assessee had entered into oral agreement to purchase the second floor on 2008 itself and also had made the payments right from 2008; Revenue again contented to reckon the period of holding from 2009 when the sale deed was executed; ITAT peruses the provisions of Sec. 2(47) and Sec. 54 / 54F to hold .................Click here to read and download ITAT Order
9) HC: Income from business of Chitties incidental to attainment of main object, allows exemption u/s 11. HC refers to SC ruling in Thanthi Trust wherein it was held that if the income from the business is utilized for achieving the objectives of the Trust or institution, then it is incidental to the attainment of the objectives of the Trust; Assessee, constituted as a trust with its main object of establishing, maintaining and running a hospital for philanthropic purposes and torun Chitties / kuries as its ancillary object; Revenue contented that the first proviso to Section 2(15) does not consider Chitty business incidental to the primary object of the assessee-Trust and hence, they are disentitled from claiming exemption u/s 11................... Click here to read and download HC judgment
10) ITAT remits the issue for re-adjudication allowing long term capital loss claimed by the assessee on sale of investments in the equity shares of assessee’s wholly owned subsidiary in Singapore (M/s. Aban Holdings Private Limited, Singapore); Revenue contended that the assessee did not give any background against which the Board of Directors had taken the decision to buy-back the shares of its wholly owned foreign subsidiary, nor any evidence in respect of the Minutes of the Meeting or extracts of the Minutes of the meeting were produced; Revenue further commented that Assessee failed to explain as to why such sale of shares was succeeded by reinvestment in the same shares, thus, disallowing the long term loss; ITAT observes that the Board has taken the decision to redeem its high cost bank debts through buying back the entire shares of.................... Click here to read and download ITAT Order
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“Registration u/s 12A- New Procedure under IT Act”; Inadvertent omission to fill schedule in ITR mere “technical-error”.... and lots more!
Issue No. 230 / April 22nd, 2021
Dear Professionals,
“Taxsutra Database”, a true Income-tax research tool, is an archive of over 111620+ 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:
· Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;
· Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;
· Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.
· Judicial “forward & backward reference”
We are glad to present to you the 230th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
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Expert Column
In India, trusts are set up for the social causes and are approved by the Income-tax Department. The legal framework in India recognizes activities including "relief of the poor, education, medical relief, preserving monuments and environment, and the advancement of any other object of general public utility" as charitable purposes. They are eligible not only for exemption but the donors to such trusts can also claim deduction of the amount of donation to such recognised trusts from their taxable income. However, there have been cases when the benefits provided to such organisations have been misused and in order to curb this, the Government has been trying to bring in changes/ amendments to the way such trusts are subjected to tax.
Against this backdrop, CA Harish Kara, expresses his viewpoint on the new registration regime brought in by Finance Act, 2020 by replacing Sec. 12AA with new Sec. 12AB. The author states that the new provisionshave removed the concept of perpetuity and have provided that the registration of even existing organizations registered u/s 12A and 12AA would be renewable after 5 years. The author elucidates the important amendments in the manner and time limit of registration of charitable trusts, its validity u/s 12AB, online procedure etc. He also clarifies about the verification procedure of Form No. 10A/ 10AB and the documents which are required for registration along with it. He further clarifies that non-registration under the new provision would not amount to cancellation of registration but the registration earlier granted would merely become inoperative on the expiry of the time period. The author concludes by saying “Gone of the days for bogus entities trying to make personal profits through bogus entities under the guise of charitable organizations”.
Click here to read the Article titled “Registration u/s 12A- New Procedure under Income Tax Act”
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Key Takeaways from Handpicked Rulings
1) ITAT: Inadvertent omission to fill schedule in ITR mere “technical -error”, the object of assessment is to determine “correct total income” of the taxpayer – ITAT holds that the ignorance of the assessee or inadvertent mistake committed by the assessee should not come in his way in claiming exemption, which is otherwise allowable under the Act. Notes that, assessee, out of ignorance or inadvertence had omitted to mention the details of exempt income..……Click here to read and download copy of ITAT Order
Note: ITAT in [TS-5318-ITAT-2016(Mumbai)-O] held that "technical-error of non-filing relevant ITR-schedule not fatal for claiming treaty benefit"
2) HC: Trust should not be denied Sec.11 benefit only on account of its disability to produce the necessary records - HC directs assessee-trust to produce all the available records with it before Revenue, also directs Revenue to look into the entire records closely and threadbare before ascertaining the status of the Trust for the period between 201314 and 201617 and grant exemption u/s 11; Assessee trust lost all its records relating to its registration proof etc ……………….. Click here to read and download copy of HC Judgment
3) HC upholds assessee’s claim for AY 2008-09, holds the amendment to Sec.40(a)(ia) (by Finance Act 2010 to be applicable retrospectively from the date of insertion of Sec. 40(a)(ia) i.e. AY 2005-06; Relies on SC ruling in Calcutta Export Company wherein it was held “…the amendment made by the Finance Act, 2010 being curative in nature required to be given retrospective operation i.e., from the date of insertion of the said provision.”; Remarks that the amended provision of Sec 40(a)(ia) should be interpreted ............... Click here to read and download copy of HC Judgment
4) ITAT: Letting out of property is separable from letting out of other assets – ITAT holds that the rental income earned from letting out of property (factory building) is taxable under the head “income from house property” and not “income from other sources”. ITAT notes that (i) the assessee is the owner of the property in terms of section 22 of the IT Act 2) the rental income on lease of factory premises is taxable under the head house property ………..Click here to read and download copy of ITAT Order
5) HC upholds Non-Resident assessee’s claim of exemption u/s 54F on investment in residential property in USA utilizing the capital gains earned on sale of immovable property in India; Relies on co-ordinate bench ruling in Vinay Mishra wherein it was held that the memorandum of objects of Finance Act, 2014 clearly provides that amendments are effective from April 01, 2015 and the CBDT Circular No. 1/ 2015 dated January 21, 2015 also states that amendment brought in Sec. 54F(1) is prospective in nature…………Click here to read and download copy of HC Judgment
6) HC holds that since the ITAT’s order was set aside entirely by the Court, it cannot be said the remand order by the ITAT is perverse; Revenue had disallowed the claim of depreciation on the enhanced value as against WDV of the assets, which was dismissed by the ITAT; During pendency of the appeal by the Revenue with the court against ITAT’s order, RBI passed an order for assessee company’s wind up; HC remits back the matter to ITAT for fresh adjudication as per provisions of Sec. 158BB which the ITAT ruled against the assessee ...........Click here to read and download copy of HC Judgment
7) HC: Mistake in specifying assessment year for which penalty was levied, ‘non-curable’ u/s.292B - HC quashes the order passed by the ITAT that upheld Revenue’s claim of rectification of clerical errors or accidental omission u/s 292B for typographical errors; Assessee had committed a default in respect of AY 2007-08 and did not pay the tax on account of financial hardship, however, Revenue held the assessee to be in default and charged him for penalty u/s 221 for AY 2008-09 claiming it to be a typographical error in the order copy; HC on perusal of the provisions........... Click here to read and download copy of HC Judgment
8) HC quashes the notice issued u/s 148 issued to the assessee for AY 2011-12 – HC notes that revenue had issued notice on reasons to believe that the income has escaped assessment within the meaning of Sec. 147 without setting out the reasons for initiating the proceedings; HC accepts assessee’s contention that the notice issued was non-application of mind as it was issued merely on the basis of information received from the Investigation wing; Holds “…the expression "reason to believe" is stronger than the word "satisfied". The belief should be based on material that is relevant and cogent.” and the Revenue is mandatorily required to ............. Click here to read and download copy of HC Judgment
9) HC: Under Income-tax Act firm and its partners are separate entities – HC dismisses revenue’s action to reopen the assessment u/s 148 against one of the partners (assessee) of a partnership firm for AY 2012-13; Assessee acted as a signatory in the capacity of a partner to the firm for purchase of two immovable properties during the subject AY along-with other partners; Assessee contended that the notice u/s 148 is not sustainable in law as the properties in question were purchased by the partnership firm wherein the assessee is one of the partners and he is not the purchaser in his individual capacity; HC denies the proposition established by various judicial precedents that partnership is not a legal entity, remarks that although a firm does not have any legal existence apart from its partners............. Click here to read and download copy of HC Judgment
10) ITAT - “Swapping of shares is a recognized standard commercial practice and cannot be treated as any tax evasion technique” - ITAT holds that the order passed by AO cryptic on the issue of application of Sec. 68 in case of assessee company for AY 2012-13 for swapping of its shares, restores the matter back to the AO; Holds that provisions of Sec. 68 does not apply when the purchase and allotment of shares happen under a barter system, i.e, acquiring shares of certain companies from certain shareholders without paying any cash consideration, instead, setting it through issuance of its shares to the respective parties; Assessee, engaged in the business of real estate, showed share capital issued at a huge premium amount in the first year..................Click here to read and download copy of ITAT Order
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Bharat's Income Tax Act (32nd edition)
Bharat's Income Tax Rules (30th Edition)
Handbook to Direct Taxes
Handbook to Income Tax Rules
Direct Taxes Ready Reckoner
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Key Amendments to the Finance Act, 2021; Rejection of application u/s 254(2) not order appealable u/s 260A..and lot's more!
Issue No. 229 / April 7th, 2021
Dear Professionals,
“Taxsutra Database”, a true Income-tax research tool, is an archive of over 111510+ 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:
· Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;
· Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;
· Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.
· Judicial “forward & backward reference”
We are glad to present to you the 229th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
***********************
Expert Column
The Finance Bill, 2021 received its Presidential assent on March 28, 2021. It has undergone more than 100+ amendments before being passed by the Parliament.
In this context, Nitish Ranjan and Richa Bakiwala (Manager – Taxation at Manohar Chowdhry & Associates), discuss some of the significant amendments to the original bill. Discussing the amendments brought in with respect to taxation of income arising from reconstitution of firm/AOI/BOI, the authors highlight that the intention behind substituting 45(4) and inserting new sub-section 4A and deeming provision u/s 9B is to overcome the decisions of the Courts wherein it was held that the distribution, division or allotment of assets of the partnership is nothing but a mutual adjustment of rights between the partners. The authors also touch upon the slew of measures taken to further encourage IFSCs such as incentivizing aircraft leasing u/s 10(4F), facilitating relocation of foreign funds to IFSC u/s 10(23FF), setting up of investment divisions in IFSC by Offshore banking units u/s 10(4D) and Sec. 115AD, taxing income from GDRs as provided by Sec. 115ACA, and regulating Category-I and Category-II AIFs. The authors also comment on topic of amendment in slump sale and opine “While one need to wait for the Government to prescribe the manner for arriving at the fair market value of the capital assets, the amendment would lead to a higher tax liability in cases where transfer of division or undertaking is made at lower than its fair market value.” The authors also touch upon amendments to definition of liable to tax, disallowance of self-generated goodwill, etc, deeming provision u/s 9B, etc.
Click here to read Article titled, “Key Amendments to the Finance Act, 2021”
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Key Takeaways from Handpicked Rulings
1) HC: Omission to disclose material facts attracts jurisdiction u/s 148; Upholds reassessment - HC upholds reassessment proceedings initiated on assessee-company for AY 2003-04; Revenue initiated reassessment proceedings u/s 148 on the ground that assessee had failed to disclose material facts w.r.t. non-compete fees to its associate companies under 2 agreements and claimed as revenue expenditure; Observes that the valuation in the Agreement has not been clearly explained by the assessee; Further notes that when detailed questionnaire was issued by Revenue u/s 143(2), the assessee did not make full disclosure in respect of ..............Click here to read and download HC judgment
2) HC: Dismisses writ petition filed to circumvent time-barred procedure of appeal - HC dismisses the writ for AY 2009-10 by assessee, holds that Court cannot assume a role of an appellate court and examine the veracity and legality of an order of assessment on merits; The Revenue passed order u/s 144 without issuing any notice/ affording an opportunity to assessee and raised the demand; Assessee, being unaware of remedy of appeal, filed revision petition, which was rejected since assessee did not appear for hearing due to reasons beyond his control. Assessee was filed a writ petition which was disposed and assessee was directed to appear before Revenue; Subsequently, the revision petition was rejected.............Click here to read and download HC order
3) ITAT: Attributes 15% of revenue earned in India to Spanish co’s PE, Deletes Revenue’s 75% attribution - ITAT deletes Revenue’s 75% profit attribution to Spanish Company’s PE in India and holds that 15% profit attribution is sufficient for AYs 2013-14 to 2016-17; Assessee, tax resident in Spain, developed computer systems for travel agencies and Airlines for managing reservations and ticketing; Revenue contended that computers installed in the premise of Indian subscribers constitute fixed place PE and Amadeus India constitutes DAPE of assessee and accordingly, attributed 75% of income earned in India to the PE. ITAT observes that ................Click here to read and download ITAT order
4) HC: Decision on application for registration u/s 12A to be made within 6 months - HC declares the petitioner as a duly registered society under Section 12A owing to failure on the part of Commissioner to decide the application u/s 12A afresh in light of ITAT’s directions within 6 months; HC observes that assessee’s application for registration u/s 12A was rejected by the Commissioner and on appeal against the same, ITAT set aside the order of the Commissioner through order dated July 8, 2007 and issued directions for deciding the issue on merits, resulting in the revival of application for seeking registration u/s 12A......... Click here to read and download HC judgment
Note: SC in [TS-5051-SC-2016-O] clarifies Allahabad-HC ruling; Deemed registration u/s 12AA effective after 6 months period
5) HC: Sets aside CIT(A)’s order rejecting stay petition without disclosing reasons - HC allows assessee’s writ petition against CIT(A)’s order rejecting assessee’s stay application without disclosing any reasons; Assessee contended that the impugned order rejecting the stay petition is suffering from total non-application of mind in as much as it is not disclosing any reason for rejection of the request for a stay to the assessment order. HC observes that CIT(A) had not disclosed any reasons for the denial of stay ...............Click here to read and download HC order
6) HC: Sets aside reassessment order on account of change of opinion, Deletes disallowance u/s 40(a)(i) - HC allows writ petition challenging reassessment order on account of change of opinion and deletes disallowance u/s 40(a)(i) for AY 2004-05 & 05-06 on payments made to non-residents without deducting tax at source; Assessee made payments to non-resident owners of the ship/liners under the Bare Boat Charter Cum Demise (BBCD), Voyage Charter and Time Charter without deducting tax at source u/s 195, which was disallowed by Revenue, u/s 40(a)(i) on amount paid towards BBCD hire charges to M/s. Dolphin Maritime, Cyprus only; Subsequently, assessment for both the years were reopened and payments made to other companies were also disallowed u/s.40(a)(i). On filing a writ petition against the reassessment order HC observes that .............. Click here to read and download HC Judgment
7) HC: ITAT’s rejection of application u/s 254(2) not order appealable u/s 260A - HC holds that rejection of application u/s 254(2) is not order appealable u/s 260A and requires invocation of writ jurisdiction; Assessee’s challenge against ITAT’s rejection of application for rectification u/s 254(2) was rejected on the ground that there is an alternate remedy of appeal as provided under Section 260A; HC observes that the main issues in the appeal were: (i) whether there could be an appeal filed under Section 260A against the rejection of an application under Section 254(2)and(ii) whether the ground raised is a mistake, which could be rectified under Section 254(2)......... Click here to read and download HC Judgment
Note: HC in [TS-5292-HC-2020(BOMBAY)-O] HC dismisses Writ, impose cost of Rs. 10,000/- on the petitioner. Notes that not only was there no mistake apparent from the record but in the garb of the Misc. Application, petitioner had sought for review of the final order passed by the ITAT and for re-hearing of the appeal which is not permissible in law.
8) HC: Grants depreciation at 10% on roads developed and maintained by TN Industrial Dev. Corpn - HC holds that roads developed and maintained by the assessee are eligible for depreciation at 10% by considering the roads as ‘buildings’; Assessee, a JV between Tamil Nadu Industrial Development Corporation Limited and Tidel Park, claimed depreciation on roads, which have been developed and maintained by it pursuant to the agreement entered into with the State Government..........Click here to read and download HC Judgment
Note: SC in [TS-5485-SC-2018-O] dismissed revenue SLP against HC [TS-6879-HC-2017(Rajasthan)-O] where the Court went by the common parlance to construe the meaning of "road" and held it as a place where public has access to and held that development of road includes construction of toll booth, right to collect fee, right to restrict access to people etc.
9) HC: Grants deduction of internet expense from Export turnover and Total turnover; Follows SC ruling in HCL Tech - HC dismisses Revenue’s appeal and grants exclusion of internet expenditure from both Export turnover and Total turnover for the purpose of computation of deduction u/s 10A; HC relied on co-ordinate bench ruling, which in turn followed SC ruling in HCL Technologies Ltd. where deductions on freight, telecommunication, and insurance attributed to the delivery of computer software u/s 10A was allowed from both Export turnover and Total turnover ............... Click here to read and download HC order
Reservoir Steal the Deal - 5 Budget Publications at just Rs.1995/- !!
If you are a Direct Taxation practitioner, you cannot miss this opportunity to bag the e-book bundle of Budget Publications from Taxsutra! Avail the offer today!
Get the following 5 titles at just Rs. 1995/-. All Inclusive.
Bharat's Income Tax Act (32nd edition)
Bharat's Income Tax Rules (30th Edition)
Handbook to Direct Taxes
Handbook to Income Tax Rules
Direct Taxes Ready Reckoner
These are E-Book and will be made available to you on Taxsutra Reservoir under My Library
With a personally licensed Digital E book copy you can:
Enjoy a great reading experience 24 X 7 on anydevice of your choice offering complete mobility
Highlight sections of the Report, create notes and bookmarks, revisit their notes
Seamlessly move from one section of the Report through another via a well-defined index of contents
Gift to Senior Citizens; Appeals for VsV Benefit; Disallowance of Excess Application by Trusts; Dividend tax...and lots more!
Issue No. 228 / March 19th, 2021
Dear Professionals,
“Taxsutra Database”, a true Income-tax research tool, is an archive of over 111300+ 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:
· Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;
· Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;
· Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.
· Judicial “forward & backward reference”
We are glad to present to you the 228th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
***********************
Expert Column
The very first direct tax proposal spelt out by the Hon'ble Finance Minister in her budget speech of 2020-21 was, “Relief to Senior Citizens”. The bill proposes to provide senior citizens exemption from filing return of income subject to fulfilment of certain conditions. In this regard, CA Anand Eriwal analyses the proposed Sec.194P for the purpose of reduction of compliance burden of senior citizens.
The author examines the conditions specified in the section and highlights that certain matters would be specified by the Government at a later stage by way of notification including the details that needs to be furnished in the declaration by the Senior Citizen to the specified bank. The author also dwells on some of the issues that may need consideration. The author ponders whether the interest income from specified bank would cover interest from savings bank or even interest from fixed deposits maintained by the Senior Citizen in that same bank would also be covered. While signing off, the author remarks “We are not sure, how the new provisions of Section 194P of the Act would be practically useful to senior citizens… However, let us hope that Section 194P would indeed be a gift to some of our Senior citizens.”
Abolition of DDT was a welcome move introduced by the Finance Act 2020 which have yielded benefits to many while also creating certain interesting issues that has crept in that needs to be addressed. In this backdrop, author Kalpesh Bafna (General Manager - Finance (Direct Tax & Strategic Initiatives), Himatsingka Seide Limited) explains the fact that how DDT on one hand proved to be a boon while on the other proved disadvantageous.
The author clarified that in the absence of details of the ultimate beneficiary, the shares would be allocated to clearing members who in turn will serve the purpose of identifying the ultimate shareholders and distributing the dividend appropriately, under the new taxation system. Author elucidates the challenges that will arise in case of these clearing members who would be required to claim the refund of TDS deducted by the companies while distributing dividend on aggregate basis, thus, blocking working capital for clearing members.
The treatment of excess application over income carried forward to future years has been a topic of debate with divergent views by various Courts. In this backdrop, the author, Mr. Manoj Kumar (Senior Partner, Manoj Kumar Mittal & Co) has elucidated the position pre and post the amendment introduced in the Finance Bill, 2021.
The author highlights that the position was settled by the SC ruling in Subros Educational Society, where it was held that excess expenditure by a trust is allowed to be set off against income of subsequent years. Remarks that the amendments in Sec. 10(23C) and Sec. 11, when read together, indicate that the Government has only amended the year of allowability of excess application of expenses over income carried forward from previous year without intending to disallow the claim. Explains that there are four sources of funds for application by a trust: (i) Corpus fund, (ii) Loan received during the year, (iii) fund accumulated out of 15% saved over a period, and (iv) pending creditors. Clarifies that post-amendment, the excess application of expenses will be allowed to be carried forward and set off “in the future years in which the amount withdrawn from corpus fund in earlier years is invested back into it.”
Click here to read the article titled “Disallowance of carried forward of excessive application of expenditure over income by FB 2021 is myth or reality”
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Key Takeaways from Handpicked Rulings
1) HC: Allows assessee's writ in order to enable to go for the Vivad se Vishwas Scheme (VsVS) – HC sets aside CIT(A)’s order dismissing assessee’s appeal, remits the appeal for fresh consideration by CIT(A), rendering the appeal ‘pending’ for assessee to be able to go for the Vivad se Vishwas Scheme (VsVS); Considers assessee’s appeal that owing to CIT(A)’s order dismissing assessee’s appeal, which besides being illegal on grounds of violation of principles of natural justice, disenables the assessee from filing an appeal under the VsVS as the appeal is no longer pending before any appellate authorities; HC accepts assessee’s plea, notes that assessee has not been provided an opportunity to rectify the formal defect of not filing a condonation of delay (of one day) and accordingly holds that the order passed by CIT(A) is in violation of principles of natural justice; Explains that “once the Appellate Authority were to find that appeal is to be dismissed on the ground that ..........Click here to read and download HC order
2) ITAT : An independent building can have a number of residential units and it will not lose the character of "one residential house" for purpose of Sec.54F – ITAT allows exemption u/s.54F, rejects lower authorities' stand that assessee was not eligible for the same as he owned more than one property; Assessee along with other family members had sold an immovable property on 20-08-2015 (AY 2016-2017) and claimed exemption u/s. 54F; AO noticed that the assessee had received a building by way of gift on 13.8.2015 and the said building consisted of ground floor, first floor and second floor accordingly, took the view that each of the unit is a separate house; CIT(A) relied on jurisdiction ITAT ruling in case of [TS-8934-ITAT-2019(Bangalore)-O] confirmed AO order and rejected the claim for deduction u/s 54F; ITAT notes that.................Click here to read and download ITAT order
3) ITAT: Allows Sec.80P benefit to Agricultural Co-operative soceity; Follows SC ruling in Mavilayi Co-op bank - Cochin ITAT grants Sec.80P deduction to assessee (Agricultural credit co-operative society registered under Kerala Co-operative Act) for AY 2017-18; Revenue rejected assessee’s claim of deduction u/s 80P stating that the assessee did not fulfill the primary object of credit society of providing financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities........... Click here to read and download ITAT order
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Twin claim u/s 80HHC/80-IA; Receipt of bonus-shares u/s 56(2); Revisionary powers of CIT u/s. 263; Loss of Shareholding - Whether Capital Loss?... and lots more!
Issue No. 227 / March 9th, 2021
Dear Professionals,
“Taxsutra Database”, a true Income-tax research tool, is an archive of over 111160+ 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:
· Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;
· Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;
· Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.
· Judicial “forward & backward reference”
We are glad to present to you the 227th 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) ITAT allows Revenue appeals in Co-operative Bank case, upholds Pr. CIT's Sec. 263 order - ITAT upholds CIT's revision u/s 263 of AO's assessment order in respect of loss on account of One time Settlement (OTS) in case of assessee, a co-operative bank; Pr CIT noticed that AO completed the assessment by allowing deduction u/s 36(1)(vii) without referring to its first proviso and applying the provisions of section 36(1)(via) r.w.s 36(2); Accordingly, the PCIT issued show cause notice to the assessee by issuing notice u/s. 263(1) calling upon to explain as to why the assessment order be not cancelled / modified; Assessee submitted that “loss on OTS” is nothing but the claim of deduction of bad debt ..... Click here to read and download ITAT Order
2) ITAT: Upholds revision u/s. 263 for AO’s non-observance of impact of observations of special auditor in earlier years - ITAT upholds Pr CIT’s invocation of revisionary jurisdiction u/s. 263 for 2014-15, in absence of inquiry by AO on the differences in the values adopted in the balance sheet for the present year considering changes made by the special auditor appointed u/s. 142(2A) for the previous year i.e., AY 2013-14; Observes that during the assessment, if the AO has considered the details and formed an opinion, which is one of the possible views in law, then that view deserves not to be replaced by the higher authority i.e. Commissioner while exercising the powers u/s 263 of the Act; However, states that “A moot question before us is, whether the AO has taken one of the views possible in law?”; Noting that the AO issued notice only on 20.12.2017, and he has passed the assessment order on 30.12.2017, ITAT opines that even if one assumes that AO had taken cognizance of the details, and was duly aware about the........Click here to read and download ITAT Order
3) ITAT: Mere mentioning the wrong section is not fatal to the addition, substance prevails over form – ITAT rejects assessee's contention that the unexplained deposit into bank account cannot be considered as income u/s 68 and it should be u/s. 69 / 69A of the Act; Notes that assessee made huge cash deposits in his bank account ......Click here to read and download ITAT Order
Note: Bangalore ITAT in [TS-7605-ITAT-2017(BANGALORE)-O] held that mere mention of section 153C in the assessment order will not render the assessment invalid or void ab-initio.
4) ITAT allows twin claims of Section 80HHC and Section 80-IA - ITAT, in the second round of proceedings, rules in favour of the assessee, follows SC decision in [TS-5090-SC-2015-O]; Assessee filed an appeal claiming that CIT(A) erred in upholding the decision of the AO of restricting the deductions under Chapter VI-A despite the fact that the aggregate of deductions under section 80IA and under section 80HHC was less than 100% of the profits of the business of the assessee; ITAT notes that Revenue's SLP in [TS-5090-SC-2015-O], stands dismissed on 17-09-2018, meaning thereby that the corresponding HC’s order deciding the issue in assessee's favour and against the department has attained finality that the twin claims of Section 80HHC and Section 80-IA raised at the former's behest qua profits of the eligible business undertaking do not amount to double deduction.......Click here to read and download ITAT Order
Note: ITAT in the aforesaid order notes that SC in [TS-5090-SC-2015-O] has dismissed Revenue’s appeal against HC order allowing twin claim of deductions u/s. 80HHC and 80-IA. "On the contrary, the division bench comprising Justice Anil R. Dave and Justice Deepak Misra referred the question of twin deduction u/s 80HHC and 80IA to a larger bench due to difference of opinion expressed in the Order dt. 10.12.2015
5) HC: Receipt of bonus-shares, though without consideration, not taxable u/s 56(2) – HC dismisses Revenue’s appeal, upholds ITAT order deleting addition made u/s 56(2)(vii)(c), holds that bonus shares received by assessee during AY 2012-13 does not result in ‘receipt of property without consideration’ as envisaged u/s 56(2)(vii)(c); Notes that 56(2)(vii) of the Act contemplates two contingencies firstly, where the property is received without consideration and secondly, where it is received for consideration less than the fair market value; Explains that “The issue of bonus shares by capitalization of reserves ......Click here to read and download HC Judgment copy
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Expert Column
Pursuant to announcement of merger of LVB with DBS India, many investors have been raising queries regarding the claim of loss on shareholding in LVB shares and whether under the tax laws, assessees are entitled to claim the loss in the current financial year and set it off against any capital gain on the sale of other assets. With the stock market booming, investors made huge gains by way of capital gains and if not attentive, they may end up paying tax (including advance tax) without setting off the eligible losses which they are otherwise entitled to.
Against this backdrop, CA S. Ramanujam analyses the LVB-DBS amalgamation scheme while scrutinizing as to when the loss actually crystallises so as to enable the assessee to claim it as a deduction. The author highlights steps taken by the Govt. and RBI to protect the investors’ / depositors’ interests to rescue companies/financial institutions that went into financial crisis. Talking specifically about the LVB crisis, the author inter alia points out an interesting clause under the amalgamation scheme notified by the Finance Ministry, which specifies that all the share capital and reserves & surplus of LVB are written off as on November 27, 2020 and all the value of shares became nil.
Analyzing the relevant provisions of the Income Tax Act and case laws explaining the applicability of ‘extinguishment’, the author observes that an extinguishment has occurred in LVB’s shares. The author opines that the ultimate outcome in this case even when, in the most unlikely scenario, a compensation is ordered by Courts to all shareholders may not affect the present claim, based on the RBI notifications, one can claim the loss which can be carried forward if there are no matching capital gains to set off. In conclusion, the author remarks that “One can end up by saying—the law needs to gallop too, along with the new solutions offered to tackle bigger scams; both should move hand in hand!”
Click here to read this incisive article titled “Loss of Shareholding in Lakshmi Vilas Bank - Whether Capital Loss?”
Reservoir Budget Bonanza - Taxsutra Presents Income Tax Act, Rules, Handbook to Direct Taxes, Handbook to Income Tax Rules & DTRR at Irresistible Price!!
If you are a Direct Taxation practitioner, you cannot miss this opportunity to bag the e-book bundle of Budget Publications from Taxsutra! Avail the pre-release offer today!
Get the following 5 titles at just Rs. 1995/-. All Inclusive. Pre-book your bundle today (The e-books will be released around 20th March 2021 and a personally licensed E book copy will be allocated to you on www.taxsutrareservoir.com)
CA Manjula A (Vishnu Daya & Co LLP) has authored an article to discuss the key elements of Section 194Q such as applicability on buyers turnover exceeding INR 10 Crore, rate of deduction 0.1% of the aggregate value of the goods that exceed INR 50 Lakh and 5% in case the seller does not hold a PAN in India. Further, the author clarifies, through FAQs, who is liable to deduct tax, applicability on types of the assessee, when shall tax be deducted, whether TDS is required to be made on the entire consideration or only on the consideration that exceeds INR 50 Lakhs and TDS to deducted on various kinds of purchases etc.
Against this backdrop, CA Harish Kara, expresses his viewpoint on the new registration regime brought in by Finance Act, 2020 by replacing Sec. 12AA with new Sec. 12AB. The author states that the new provisionshave removed the concept of perpetuity and have provided that the registration of even existing organizations registered u/s 12A and 12AA would be renewable after 5 years. The author elucidates the important amendments in the manner and time limit of registration of charitable trusts, its validity u/s 12AB, online procedure etc. He also clarifies about the verification procedure of Form No. 10A/ 10AB and the documents which are required for registration along with it. He further clarifies that non-registration under the new provision would not amount to cancellation of registration but the registration earlier granted would merely become inoperative on the expiry of the time period. The author concludes by saying “Gone of the days for bogus entities trying to make personal profits through bogus entities under the guise of charitable organizations”.
In this context, Nitish Ranjan and Richa Bakiwala (Manager – Taxation at Manohar Chowdhry & Associates), discuss some of the significant amendments to the original bill. Discussing the amendments brought in with respect to taxation of income arising from reconstitution of firm/AOI/BOI, the authors highlight that the intention behind substituting 45(4) and inserting new sub-section 4A and deeming provision u/s 9B is to overcome the decisions of the Courts wherein it was held that the distribution, division or allotment of assets of the partnership is nothing but a mutual adjustment of rights between the partners. The authors also touch upon the slew of measures taken to further encourage IFSCs such as incentivizing aircraft leasing u/s 10(4F), facilitating relocation of foreign funds to IFSC u/s 10(23FF), setting up of investment divisions in IFSC by Offshore banking units u/s 10(4D) and Sec. 115AD, taxing income from GDRs as provided by Sec. 115ACA, and regulating Category-I and Category-II AIFs. The authors also comment on topic of amendment in slump sale and opine “While one need to wait for the Government to prescribe the manner for arriving at the fair market value of the capital assets, the amendment would lead to a higher tax liability in cases where transfer of division or undertaking is made at lower than its fair market value.” The authors also touch upon amendments to definition of liable to tax, disallowance of self-generated goodwill, etc, deeming provision u/s 9B, etc.
The author examines the conditions specified in the section and highlights that certain matters would be specified by the Government at a later stage by way of notification including the details that needs to be furnished in the declaration by the Senior Citizen to the specified bank. The author also dwells on some of the issues that may need consideration. The author ponders whether the interest income from specified bank would cover interest from savings bank or even interest from fixed deposits maintained by the Senior Citizen in that same bank would also be covered. While signing off, the author remarks “We are not sure, how the new provisions of Section 194P of the Act would be practically useful to senior citizens… However, let us hope that Section 194P would indeed be a gift to some of our Senior citizens.” 
The author clarified that in the absence of details of the ultimate beneficiary, the shares would be allocated to clearing members who in turn will serve the purpose of identifying the ultimate shareholders and distributing the dividend appropriately, under the new taxation system. Author elucidates the challenges that will arise in case of these clearing members who would be required to claim the refund of TDS deducted by the companies while distributing dividend on aggregate basis, thus, blocking working capital for clearing members. 
The author highlights that the position was settled by the SC ruling in Subros Educational Society, where it was held that excess expenditure by a trust is allowed to be set off against income of subsequent years. Remarks that the amendments in Sec. 10(23C) and Sec. 11, when read together, indicate that the Government has only amended the year of allowability of excess application of expenses over income carried forward from previous year without intending to disallow the claim. Explains that there are four sources of funds for application by a trust: (i) Corpus fund, (ii) Loan received during the year, (iii) fund accumulated out of 15% saved over a period, and (iv) pending creditors. Clarifies that post-amendment, the excess application of expenses will be allowed to be carried forward and set off “in the future years in which the amount withdrawn from corpus fund in earlier years is invested back into it.” 
Against this backdrop, CA S. Ramanujam analyses the LVB-DBS amalgamation scheme while scrutinizing as to when the loss actually crystallises so as to enable the assessee to claim it as a deduction. The author highlights steps taken by the Govt. and RBI to protect the investors’ / depositors’ interests to rescue companies/financial institutions that went into financial crisis. Talking specifically about the LVB crisis, the author inter alia points out an interesting clause under the amalgamation scheme notified by the Finance Ministry, which specifies that all the share capital and reserves & surplus of LVB are written off as on November 27, 2020 and all the value of shares became nil.