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!
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Budget 2021 : Faceless ITAT; Goodwill amendment - impact on business synergies: Taxation of a 'Goan' ....and more!
Issue No. 226 / March 03rd, 2021
The government, in the Union Budget 2021, has in an endeavor to adopt the digital way of doing things has further taken ahead the faceless initiative and made announcements regarding the faceless proceedings before the Income-tax Appellate Tribunal (ITAT).
In this backdrop, author Sanjiv Chaudhary, Senior Advisor, BSR & Co LLP, evaluating the proposal opines that “Though the faceless ITAT scheme is yet to be rolled out by the government, perhaps we may successfully implement the existing faceless schemes and then may be use it to navigate it for the ITAT level proceedings”. Further, emphasising on the Budget speech which mentioned that where personal hearing is needed, it shall be done through videoconferencing (VC), the author believes that “Giving a personal hearing on need basis may result in a denial of natural justice and may entail the risk of defeating the entire purpose of providing a judicial ruling by the ITAT only after a factual analysis and examining the facts of the case.” Further, highlighting the possibility of contrary views by two different benches of the ITAT, the author states that “there arises controversy when it comes to adhering to any one of them for precedence value especially in a third jurisdiction.”. The author signs off stating that “Though the government has embarked on the initiative of a digital environment, it would be interesting to see how the same pans out in the midst of the various bottlenecks being faced particularly, when there are several challenges viz. at one end infrastructure in all forms in the two tier cities may act as an impediment to implement digital schemes effectively and at the other end the pressing need for a harmonious integration of the entire ITAT forum into a dynamic jurisdiction until the scheme is rolled out.”
Historically, in business combinations viz amalgamations, demergers, slump sale, etc., the balance consideration/residual value over and above the net tangible assets (assets minus liabilities) taken over, is recorded as ‘goodwill’ towards acquisition of a bundle of business and commercial rights. In deciding whether such goodwill is eligible for depreciation in favour of the taxpayer, SC in case of Smifs Securities observed that such excess consideration constituted a capital right acquired by the assessee company.
In this backdrop, Sharath Rao (Partner, Tax, Deloitte Haskins & Sells) & Amita Jivrajani, Manager analyse the amendments proposed in the Union Budget 2021 which in view of the authors “rains on dealmakers’ parade”. The amendments specifically exclude ‘goodwill of a business or profession’ from the definition of the term ’block of assets’ contained in section 2(11) with corresponding amendments to sections 32, 50 and 55. Highlighting that the earlier defenses in the forms of ejusdem generis besides scope for new arguments in favour of assessee’s claim for depreciation, the authors opine that “While the objective of the government to institutionalise the above amendments was to grease the squeaky wheel, these proposals may have led to opening a whole gamut of new questions and interpretational avenues.”
The Finance Bill, 2021 proposed an amendment to Section 139 to extend the due date of filing of income tax returns to the spouse of an individual covered under Section 5A and required to file a tax audit report under Section 44AB.
In this context, CA Ashish V. Prabhu Verlekar and CA Satyaprakash Kamath provide a brief background of Section 5A and the issues and hardships faced by such individuals and the probable resolutions.
Lucidly explaining the history of taxation of a ‘Goan’ covered under Portugese Civil Code and provisions of Sec.5A, the authors highlight that “The implications of this section on an individual, governed under the Portuguese Civil Code of 1860 as applicable in Goa, is that income from any source earned by either spouse, not being salary, is to be clubbed together, summed up and equally divided in the hands of each spouse.” The authors state that considering the uniqueness of the provision and the special reporting requirements therein, the computerised processing of returns without considering the logic of Section 5A results in wrongly determining returns as defective and incorrect demands on account of non-apportionment of TDS due to non-matching with Form 26AS. Likewise, the authors highlight hardship faced by taxpayers due to differential due dates for an assessee covered under Section 5A and the spouse of such assessee is a partner in a firm covered under tax audit. The authors remark that “The current budget proposal to extend the due date for spouse of an individual covered under Section 5A being a partner in a firm covered under tax audit is a welcome move and it is encouraging to see that the Income Tax Department is proactively addressing the hardships faced by Goan assessees at the time of processing of income tax returns.”
“Taxsutra Database”, a true Income-tax research tool, is an archive of over111080+ 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”
The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.
Vivad se Vishwas Special : Condonation of delay in appeal-filing by Courts to enable the Scheme benefit!
Issue No. 225 / February 23rd, 2021
The ongoing Vivad se Vishwas scheme, 2020 which was introduced with an aim to reduce pending direct taxes litigations, is very beneficial to both the taxpayers and the Revenue. One of the eligibility criteria for the scheme is that an appeal in case of the taxpayer is ‘pending’ at any appellate forum (CIT(A), ITAT, High Court, Supreme Court) as on 31st January, 2020 or the time limit for filing such an appeal had not expired as on 31st January, 2020. However, in practicality, there are many taxpayers who had not filed an appeal in time before 31st January, 2020 but thereafter desire to opt for the scheme. In such cases, the taxpayers have approached the Courts pleading a condonation of delay in order to enable them to opt for the scheme. Considering the benefits of the scheme to both the taxpayers and the Revenue, the Courts in many occasions have been liberal and granted the condonation of delay in filing an appeal and thereafter allowed the assessee to withdraw the same to enable the taxpayers to approach for the Vivad se Vishwas scheme, 2020.
We, at Taxsutra Database, have made an attempt to collate a few such recent rulings and believe that it will act as a useful aid to our readers.
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1) ITAT admits assessee's appeal condoning delay of 1000+ days as a 'special case', in order to enable the assessee to go for the Vivad se Vishwas Scheme (VsVs); ITAT notes that though the reason given by the assessee for filing the appeal is neither convincing nor satisfactory, since the assessee intends to go for VsVs and pay the resulting taxes and put an end to..............Click here to read and download ITAT order
2) HC: Allows assessee's writ challenging Miscellaneous Application dismissed by ITAT, directs restoration to original number considering assessee's VSVS route undertaking – HC holds that ITAT cannot reject Miscellaneous Application (MA) against ex-parte final order even if decided on merits, merely on the ground that the assessee had sought frequent adjournments before the matter was finally heard; Sets aside ITAT order passed in MA and restores to its original number in view of the undertaking given by the assessee that it would apply under the ‘Vivad Se Vishwas’ Scheme (VsVs) in the event the appeal is restored to its original number.........Click here to read and download HC Judgment copy
3) HC condones delay in appeal filing, adjourns case in view of assessee’s desire to apply under the VsVS – HC condones a delay of 280 days in filing of appeal by Revenue; Also, accepts assessee`s request to adjourn the main appeal considering its wish to file an application for settlement of disputes under the Vivad Se Vishwas Scheme, 2020; Adjourns the case to May 19, 2021.......... Click here to read and download HC order copy
4) ITAT condones delay in appeal filing, allows appeal withdrawal in view of assessee’s wish to settle dispute under VsVS - ITAT condones a delay of 460+ days in filing of appeal by assessee, considers assessee’s submission that he has decided to settle the dispute under Vivad Se Vishwas Scheme, 2020 and therefore, the appeal be admitted so that the assessee may avail the benefit of the same............... Click here to read and download ITAT order
5) ITAT condones delay in appeal filing, allows appeal withdrawal in view of assessee’s bonafide attempt to avail the VsVS - ITAT condones a delay of 100+ days in filing of appeal by assessee, notes that though the delay is not due to appropriate and convincing reasons however, considering the bonafide attempt of the assessee to avail the scheme, condones the delay of 118 days in the filing the appeal..............Click here to read and download ITAT order
Note: Taxsutra Database Insight on “Amnesty Scheme”
1) Taxsutra Database Insight - Admitted and Pending - Amnesty Scheme - Interpretation of the word "Admitted and Pending" - Part 1 – Click here to read
2) Taxsutra Database Insight: Amnesty Scheme - Effect of Pendency of Assessee and Departmental Appeal - Disputed Tax and Tax Arrears – Part 2 – Click here to read
3) Taxsutra Database Insight: Revised Avatar of ‘Vivad Se Vishwas’ – Part 3 – Click here to read
“Taxsutra Database”, a true Income-tax research tool, is an archive of over110965+ 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”
The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.
FCCB buy-back at discount, a capital receipt not exigible to tax; FB 2021 - Faceless ITAT, Capital gains on firms/AOPs & more!
Issue No. 224 / February 16th, 2021
Dear Professionals,
“Taxsutra Database”, a true Income-tax research tool, is an archive of over 110800+ 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 224th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
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Expert Column
Exploring and evaluating the proposal to introduce faceless ITAT, R.E.Balasubramanyam, (Partner, Balu & Anand, Chartered Accountants) states that the COVID pandemic ensured that all of us had a taste of virtual proceedings before it becomes the norm and has only hastened the process. The author discusses the SC decision in Gullapalli Nageswara Rao v. A.P.S.R.T. Corporation, AIR 1959 SC 308 which elaborated on the rule of “the one who decides must hear” and explained the usefulness of a personal hearing. The author opines that with the advancement of technology, if a person is enabled to put forth his arguments from any place without being physically present before the judges, then there is no reason why such a facility should not be treated as equivalent to a personal hearing. On this note the author expresses his hopes that “when the Finance Minister talked about faceless proceedings of the tribunal, she was in fact actually meaning a virtual hearing.”
Click here to read article titled – “Budget 2021: Courting A Faceless Future”
Section 45(4) of the Income Tax Act, 1961 is proposed to be substituted and section 45(4A) inserted vide the Finance Bill, 2021, with consequential amendment of section 48. CA Dindayal Dhandaria & CA Naveen Kumar Dhandaria explore the proposals and point out the anomalies therein. Noting that the receipt of capital asset is in the hands of the ‘specified person’ but the incidence of tax is on the specified entity which does not receive the capital asset but transfers it, the authors point out that “The provisions of section 2(47) have not been amended to take care of such an exceptional situation”. Further, they highlight that section 45(4A) is proposed to apply to “money” also and state that “By no stretch of imagination, money can be a “capital asset”. The definition of “capital asset” given in section 2(14) of the Act does not cover it.”
Click here to read article titled – “Budget 2021: Capital gains on firms/AOPs”
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Key Takeaways from Handpicked Rulings
1) ITAT: Amount deemed to be undisclosed for the AYs 2016-17 cannot be brought to tax for the AYs 2017-18 - ITAT deletes addition u/s. 69A for AY 2017-18 towards cash found in a locker during search, observes that assessee last operated the locker on 29.10.2015 and that there were no no locker operations between 01.04.2016 to 25.04.2017 (the date on which the locker was operated by the Revenue), i.e., the period relevant for the impugned year, i.e., AY 2017-18; Accordingly, holds that the issue of unexplained cash found during search can be considered in AY 2017-18..........Click here to read and download ITAT Order
2) ITAT: Buy back of foreign currency convertible bonds (FCCBs) at discount falls in the nature of capital receipt not exigible to tax - ITAT dismisses Revenue’s ground, upholds deldetion of addition towards buy-back of FCCBs on discount; Notes that it is undisputed that assessee is in manufacturing business and utilised the FCCBs for purchase of capital assets for the company and most of them being depreciable asset; Further assessee has satisfied the conditions of ...........Click here to read and download ITAT order
3) ITAT : Section 139 is to be read here as section 139(4) and not to be confined to section 139(1) alone for the purpose of deposit of capital gains in the designated bank account – ITAT sets aside lower authorises order, allows exemption u/s.54B towards purchase of another agricultural land; AO denied the said claim on the ground that the assessee did not furnish details of payment as well as Capital gain account maintained with a designated bank which was confirmed by the CIT(A) by relying on the decision of Bombay HC in case of “Humayun Suleman Merchant”; ITAT notes that the HC has infact observed that the requirement of depositing before the date of furnishing of return of Income u/s 139 has not to be restricted only to the date specified in Section 139(1) but would include all sub sections of S. 139 including sub-sec (4) and that the requirement of depositing ........Click here to read and download ITAT Order
Note: In [TS-5578-HC-2014(Karnataka )-O] HC upheld Sec 54F benefit despite non deposit of amount in capital gains account scheme (CGAS)
4) ITAT: Change in the method of accounting is permissible provided it’s genuine and not bogus - ITAT deletes addition made on the premise of fall in gross profit earned by the assessee despite increase in turnover, holds the allegation of reducing profit by obtaining non-genuine bogus purchase bills as wrong and not sustainable; Observes that during the year, assessee has changed its business vastly from export of colour stones to export of diamonds and it is a common fact that the profit margin in diamond is much lesser than in colour stones which ranged between 6% to 7%; Accordingly, opines that “in view of difference in the circumstances, the results of this year i.e. A.Y. 2010-11 cannot be compared to the results of earlier year as the complete nature of business is changed from this year.”; Further, noting that assessee has backed his purchases with evidences, holds that “the allegation of reducing profit by obtaining non-genuine bogus purchase bills .......Click here to read and download ITAT Order
Note: In [TS-5074-ITAT-2020(Mumbai)-O] ITAT held that assessee has the right to change method of accounting over the present method
5) Prohibition from filing a second application before Settlement Commission only when earlier application was ‘allowed’ to be proceeded with, no bar when application is ‘rejected’ - HC dismisses Revenue's writ against ITSC order, holds that there is no bar on filing of a second application before the Settlement Commission (ITSC), when the earlier application was ‘not allowed’ to be proceeded with u/s 245D(1) of the Act; Explains that Section 245K(2) of the Act prohibits a subsequent application, only when the assessee had earlier made an application under Section 245C and such an application has been ‘allowed’ to be proceeded with u/s 245D(1); Holds that there is no provision under the IT Act, disbarring the assessee from subsequently making an application after his original application was ‘rejected’ u/s 245D(1) and ‘not allowed’ to be proceeded with..........Click here to read and download HC Judgment
“Taxsutra Database”, a true Income-tax research tool, is an archive of over110800+ 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”
The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.
Budget 2021: Relief from double taxation for NRIs; HC admits writ challenging retrospective amendment to Section 115BBE; Prosecution u/s. 276C(1)...and lots more!
Issue No. 223 / February 3rd, 2021
Dear Professionals,
“Taxsutra Database”, a true Income-tax research tool, is an archive of over 110610+ 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 223rd edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
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Expert Column
Income accumulated in Indian retirement funds such as PF & PPF are typically taxed in the year of withdrawal and not in the year of accrual. However, in the absence of a specific provision in the Indian tax law that deferred taxation even in respect of foreign retirement funds, the income earned from such funds (interest / dividends / capital gain distributions) would usually be treated as taxable in each year. In order to cure this mismatch, the Budget 2021 has proposed to insert Sec. 89A which as per author CA Rohini Ramya (Partner, Taxkode Consulting LLP) will hopefully provide relief to individuals caught in the dilemma of the differing tax treatments in India versus the country in which the fund is maintained. While the author welcomes the said amendment, he also ponders over the taxability of income that accrued into such foreign retirement funds in past years and until 31 March 2021 considering the amendment is made effect prospectively. The author also ponders over some other aspects such as the actual mechanism of the relief, Foreign Tax Credit for any foreign taxes paid on doubly taxed income etc.
Click here to read, article titled - Budget 2021: Relief from double taxation for non-resident Indians (NRIs) on Foreign Retirement Funds
Click here to read - Budget 2021: Memorandum Explaining the Provisions in the Financial Bill
Click here to read - Key Highlights & Summary of of Union Budget 2021-22
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Key Takeaways from Handpicked Rulings
1) HC admits writ petition challenging retrospective amendment to Section 115BBE, restrains coercive steps for recovery - HC admits petition filed by applicant engaged in the business of jewellery, bullion and construction, challenging constitutional validity of the notification dated 15.12.2016, wherein by insertion of the Taxation Laws (Second Amendment) Act, 2016 (No.48 of 2016), the provision as contained in Section 115BBE of the IT Act, 1961 came to be retrospectively amended w.e.f 1st April, 2017 applicable for the AY 2017-18; Opines that “Having regard to the nature of the litigation, more particularly, the challenge to the notification..........Click here to read and download HC Order
2) HC: Prosecution can be launched without waiting for assessment to be completed - HC dismisses assessee’s writ, refuses to quash prosecution under 276C(1) of Income Tax Act, holds that there is no requirement under the Act that the assessment proceedings should be completed before launching prosecution; HC notes that the complaint is not filed on the basis of any assessment order or assessment proceedings and it is filed in consequence of the concealment of share transactions in the return of income (ROI); It was noticed by the Department that the assessee had entered into share transactions during the year 2007-08, however he did not disclose any capital gain in the income tax filed for the AY 2008-09; Further in response of prosecution show cause notice, the assessee replied that he was under impression that TDS of Rs.3,53,22,371/- deducted on such income will be sufficient to meet the tax liability ................... Click here to read and download HC Order
3) HC: Cost of acquisition of shares converted from FCCBs to be calculated in terms of issue of Foreign Currency Convertible Bonds (FCCBs) and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993 - HC confirms ITAT order that period of holding shares should be from the date of conversion into shares to the date of sale of shares; Notes that bonds issued to the petitioner were issued under the FCCB scheme and the conversion price was determined on the basis of price of shares at Bombay Stock Exchange or National Stock Exchange on the date of conversion of FCBBs into shares; HC holds that the cost of acquisition has to be determined ............... Click here to read and download HC Judgment
4) ITAT: MAT credit includes surcharge and education cess - ITAT allows assessee’s appeal and directs inclusion of surcharge / cess and then allow MAT credit; Assessee submitted given that Explanation 2 to section 115JB defining 'income tax' for the purposes of Explanation (a) inter alia includes surcharge and education tax, section 115JAA does not indicate that the word "tax" has to be understood in a manner different from its usage under the rest of the Act; Assessee submitted that had the intention of legislature been to provide MAT credit without including surcharge and cess, the same would have been specifically stated in the section itself, thus submitted that MAT credit should be provided inclusive of surcharge and cess; ITAT, agreeing with the assessee and following co-ordinate bench ruling in case of Consolidated Securities, sets aside CIT(A) order and remits the matter to the AO .............Click here to read and download ITAT Order
NOTE: Delhi HC as reported in [TS-5987-HC-2013(Delhi)-O] has admitted the appeal to examine whether surcharge and education cess paid by an assessee while paying minimum alternate tax u/s 115JB are to be included while allowing credit of MAT u/s 115JAA
5) HC: Conversion of ROM to Iron Ore Concentrate constitutes 'manufacture', EOU eligible for deduction u/s 10B - HC upholds assessee's (approved 100% EOU) stand that the process of magnetic separation of impurities from the raw material through beneficiation constitutes 'manufacturing' and hence eligible for deduction u/s 10B on export profits earned during the year; Assessee purchases Run-of-Mines (ROM) and 'manufactures' Iron Ore Concentrate Fines, using high intensity magnetic separator to increase the iron content through concentration, which is eventually exported; HC clarifies that ROM is a crude ore which is of no use until it is processed and made suitable for steel making industry and this purification process is nothing but manufacturing; HC refers to definition of the term 'manufacture' ..........Click here to read and download HC Judgment
Note: In [TS-6242-ITAT-2016(Bangalore)-O] held ITAT rejects Sec 10B deduction; ‘Run of Mines’ (ROM) process is only to make Iron ore convenient to use, cannot be called ‘manufacture’ or ‘production’ of an article or thing to qualify for deduction u/s 10B and ITAT co-ordinate bench in [TS-5374-ITAT-2018(Bangalore)-O] held that Processing of Run of Mines (ROM) into iron ore is a manufacturing activity and assessee is eligible for deduction u/s. 10B.
“Taxsutra Database”, a true Income-tax research tool, is an archive of over110610+ 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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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. 
In this backdrop, author Sanjiv Chaudhary, Senior Advisor, BSR & Co LLP, evaluating the proposal opines that “Though the faceless ITAT scheme is yet to be rolled out by the government, perhaps we may successfully implement the existing faceless schemes and then may be use it to navigate it for the ITAT level proceedings”. Further, emphasising on the Budget speech which mentioned that where personal hearing is needed, it shall be done through videoconferencing (VC), the author believes that “Giving a personal hearing on need basis may result in a denial of natural justice and may entail the risk of defeating the entire purpose of providing a judicial ruling by the ITAT only after a factual analysis and examining the facts of the case.” Further, highlighting the possibility of contrary views by two different benches of the ITAT, the author states that “there arises controversy when it comes to adhering to any one of them for precedence value especially in a third jurisdiction.”. The author signs off stating that “Though the government has embarked on the initiative of a digital environment, it would be interesting to see how the same pans out in the midst of the various bottlenecks being faced particularly, when there are several challenges viz. at one end infrastructure in all forms in the two tier cities may act as an impediment to implement digital schemes effectively and at the other end the pressing need for a harmonious integration of the entire ITAT forum into a dynamic jurisdiction until the scheme is rolled out.”
In this backdrop, Sharath Rao (Partner, Tax, Deloitte Haskins & Sells) & Amita Jivrajani, Manager analyse the amendments proposed in the Union Budget 2021 which in view of the authors “rains on dealmakers’ parade”. The amendments specifically exclude ‘goodwill of a business or profession’ from the definition of the term ’block of assets’ contained in section 2(11) with corresponding amendments to sections 32, 50 and 55. Highlighting that the earlier defenses in the forms of ejusdem generis besides scope for new arguments in favour of assessee’s claim for depreciation, the authors opine that “While the objective of the government to institutionalise the above amendments was to grease the squeaky wheel, these proposals may have led to opening a whole gamut of new questions and interpretational avenues.” 
In this context, CA Ashish V. Prabhu Verlekar and CA Satyaprakash Kamath provide a brief background of Section 5A and the issues and hardships faced by such individuals and the probable resolutions.
Exploring and evaluating the proposal to introduce faceless ITAT, R.E.Balasubramanyam, (Partner, Balu & Anand, Chartered Accountants) states that the COVID pandemic ensured that all of us had a taste of virtual proceedings before it becomes the norm and has only hastened the process. The author discusses the SC decision in Gullapalli Nageswara Rao v. A.P.S.R.T. Corporation, AIR 1959 SC 308 which elaborated on the rule of “the one who decides must hear” and explained the usefulness of a personal hearing. The author opines that with the advancement of technology, if a person is enabled to put forth his arguments from any place without being physically present before the judges, then there is no reason why such a facility should not be treated as equivalent to a personal hearing. On this note the author expresses his hopes that “when the Finance Minister talked about faceless proceedings of the tribunal, she was in fact actually meaning a virtual hearing.”
Section 45(4) of the Income Tax Act, 1961 is proposed to be substituted and section 45(4A) inserted vide the Finance Bill, 2021, with consequential amendment of section 48. CA Dindayal Dhandaria & CA Naveen Kumar Dhandaria explore the proposals and point out the anomalies therein. Noting that the receipt of capital asset is in the hands of the ‘specified person’ but the incidence of tax is on the specified entity which does not receive the capital asset but transfers it, the authors point out that “The provisions of section 2(47) have not been amended to take care of such an exceptional situation”. Further, they highlight that section 45(4A) is proposed to apply to “money” also and state that “By no stretch of imagination, money can be a “capital asset”. The definition of “capital asset” given in section 2(14) of the Act does not cover it.”
Income accumulated in Indian retirement funds such as PF & PPF are typically taxed in the year of withdrawal and not in the year of accrual. However, in the absence of a specific provision in the Indian tax law that deferred taxation even in respect of foreign retirement funds, the income earned from such funds (interest / dividends / capital gain distributions) would usually be treated as taxable in each year. In order to cure this mismatch, the Budget 2021 has proposed to insert Sec. 89A which as per author CA Rohini Ramya (Partner, Taxkode Consulting LLP) will hopefully provide relief to individuals caught in the dilemma of the differing tax treatments in India versus the country in which the fund is maintained. While the author welcomes the said amendment, he also ponders over the taxability of income that accrued into such foreign retirement funds in past years and until 31 March 2021 considering the amendment is made effect prospectively. The author also ponders over some other aspects such as the actual mechanism of the relief, Foreign Tax Credit for any foreign taxes paid on doubly taxed income etc.