Interest earned on Bank deposits not eligible for deduction u/s 80IB(10); Newly formed Trusts entitled for Sec. 12AA registration;...and lots more!!
Issue No. 204 / May 6th, 2020
Dear Professionals,
“Taxsutra Database”, a true Income-tax Research is an archive of over 106870+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent ‘unreported handpicked ruling of SC, HC & ITAT’. A completely integrated service with all the latest cases powered by an advanced search engine to provide a seamless user experience; Search results supported by active filters around Court Level, Location, Case Numbers and Citation; A Unique Bulls Eye application to further enhance search by including "Exact words", "Any of these", "none of these"
We are glad to present to you the 204th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with recent rulings.
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Key Takeaways from Handpicked rulings
1) HC : Appellate Authority is to determine the appropriate amount of tax, if any, which is liable to be paid – HC sets aside the lower authorities’ order, restores Assessee’s appeal before CIT(A) for fresh adjudication on all grounds; Notes that, appeal before HC was admitted against ITAT order which held that capital gain would be applicable in AY A.Y 2009 -10 when the original transaction took place and not the year of rectification deed executed altering the original sale deed. However, Chartered Accountant who appeared before the CIT(A) ............... Click here to read and download HC judgment
2) Interest earned on Bank deposits not eligible for deduction u/s 80IB(10) – ITAT holds that interest income earned was from the investment made by the assessee in Bank deposits and not from the business of the assessee of developing housing projects; Notes, that the expression “derived from” in section 80IB(10) envisages a direct or first degree connection of the income eligible for ............... Click here to read and download ITAT order
3) HC upholds addition treating advance money not used for the purpose for which received, as income - HC observes that it was not merely that the advance received was treated as income by the AO, the addition was made as the advance money (received for the purpose of procuring land on behalf of TATA Housing) was used for purpose other than procuring the land and no document/ evidence was produced to support the claim that there was no surplus being generated from the said advance thereby with-holding the information .............. Click here to read and download HC judgment
4) ITAT: Addition based on mere presumption, guess-work or conjectures without affording opportunity of being heard, unsustainable - ITAT upholds CIT(A)’s order deleting addition of Rs. 10.20 crores on account of alleged difference in receipts as per the bank account of the assessee and receipts as per its books of account for an assessee engaged in the business of equity trading, derivatives trading and in real estate investment; Notes that the AO made additions on the basis of certain information .............. Click here to read and download ITAT order
5) HC: Private trust properties cannot be attached to recover tax dues of the trustees - HC admits writ, quashes attachment orders in respect of properties held by the Family Benefit Trust (‘the trust’) and recovery notices against the trust; HC notes that the trust was formed and settled by the Will of .......... Click here to read and download HC judgment
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Expert Column
Registration u/s 12AA is condition precedent to claim exemption under Sections 11 to 13 of the IT Act and charitable institutions also need to be registered u/s 80G of the IT Act for its donors to avail deductions. At the stage of granting registration, objects of trust / institution, purported utilization of its income, application of funds for charitable purposes, actually commenced etc usually form the grounds of consideration for grant of registration to these trusts. Recently in the case of Ananda Social & Educational Trust reported in [TS-5038-SC-2020-O] SC finally provided relief to those Charitable Trusts that have been denied registrations until now, solely for not undertaking any activities prior to applying for registration, SC held that “a newly registered Trust is entitled for registration u/s. 12AA on the basis of its objects, without any activity having been undertaken”.
In this regard Jatin Proothi (Chartered Accountant) in his article highlights that in many cases it was not possible to satisfy the CIT(E)s about whether the activities of the trust are genuine or not as required by sub clause (i) of clause (a) of sub section (1) of Section 12AA. The author examines the SC judgment to opine that it will save many newly registered public charitable or religious trust on the issue of grant of registration u/s 12A without any activities carried on by them.
Access to a strong repository of Tax Rulings is a key requirement of tax professionals like yourselves. Taxsutra Database is a brand new addition to the Taxsutra bouquet of services. Largely known for its world class real time news and updates service, Taxsutra brings to you a comprehensive, easy to use Database service which offers the following features:
Over 106870+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent unreported handpicked ruling
Completely integrated service with all the latest cases powered by an advanced search engine to provide a seamless user experience
Search results supported by active filters around Court Level, Location, Case Numbers and Citation
A Unique Bulls Eye application to further enhance search by including "Exact words", "Any of these", "none of these"
The Taxsutra Database comes at a very special Annual Subscription price of 4200 + GST AND includes a annual license to the Taxsutra Library.
“FPI & PE funds – unintended Tax Consequences; CIT(A) power to decide stay petition; Transfer of accumulated income to unregistered.....and lot more!
Issue No. 203 / April 29th, 2020
Dear Professionals,
“Taxsutra Database”, a true Income-tax Research is an archive of over 106700 + Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent ‘unreported handpicked ruling of SC, HC & ITAT’. A completely integrated service with all the latest cases powered by an advanced search engine to provide a seamless user experience; Search results supported by active filters around Court Level, Location, Case Numbers and Citation; A Unique Bulls Eye application to further enhance search by including "Exact words", "Any of these", "none of these"
We are glad to present to you the 201st edition of ‘Taxsutra Database’, where we keep you updated with recent rulings and an expert column on FPI & PE funds – unintended Tax Consequences.
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Taxsutra Database - Expert Column
In order to fight COVID-19, countries across the globe are taking measures on restriction on travel, imposing lockdown etc. Owing to the same, many employees of a foreign entity could be stranded and forced to work remotely from India and in many cases, the employees stay-period may exceed the service PE threshold. It will be important for all MNCs to review whether these “employees” are creating corporate tax risks. In this regard OECD Secretariat on April 3rd, 2020 issued guidance addressing concerns on PE,POEM etc. during COVID-19 pandemic
To determine how business should prepare to take appropriate mitigating action, Sachin Kumar BP, (Partner Manohar Chowdhry & Associates) and Nitish Ranjan (Associate) discuss the unintended tax consequences for Foreign Portfolio investments and Private equity funds based in Mauritius or Singapore, in a situation where managers thereof are temporarily away from home country and are stranded in the host country (India). The authors' inter-alia suggest robust documentation of the employees details setting out the intention of the parties to be able to take support from the guidance by OECD to mitigate Service PE/POEM exposure .
Click here to read the article titled “FPI and PE funds – unintended tax consequences of COVID 19”
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Key Takeaways from Handpicked rulings
1) HC: Transfer of accumulated income to unregistered Society, taxable u/s 11(3) – HC upholds ITAT order holding that amount give to PSWHMMS (an unregistered society) is the income of the assessee-society in terms of section 11(3)(d) by holding that the status of the donee-society is immaterial for the purposes of application of section 11(3), despite the CBDT circular itself differentiating between the societies as enumerated in section 11(3)(d) and other societies; Notes that assessee - society (working under the State Government) is registered u/s 12AA, ................. Click here to read and download HC judgment
2) HC: Mere cash credit entries in books of a firm cannot lead to addition u/s 68 – HC holds that assessee-firm only needs to prove the source of credit entries and is not required to prove the source of the source or the creditors' credit; Opines that “where a sum is credited in the books of account of a firm from a partner, the assessee firm could discharge its onus by providing three things: (i) identity of the creditor; (ii) creditworthiness of the creditor; and (iii) genuineness of transaction in question”; Explains that as per the provision of Section 68............. Click here to read and download HC judgment
3) HC: Power of Appellate Commissioner coterminous with that of ITO u/s 251 – HC holds that, power exercisable by CIT(A) u/s 251 cannot be restricted to only the issues raised by the assessee in any appeal before him, but Commissioner can exercise his discretion and do what the ITO does and further the section also empowers him to direct the AO to do what he had failed to do; Explains that the power of the Commissioner is not bridled in any way and the language of the section is plain and simple; Notes that CIT(A) deleted additions made by the AO and had made two additions .......... Click here to read and download HC judgment
4) ITAT: Sec. 50C(2) mandates reference to DVO for valuation of the property – ITAT holds valuation by District Valuation Officer (DVO) mandatory in terms of sec. 50C(2), sets aside the issue to AO for fresh adjudication after complying with the provisions of section 50C(2) by referring the valuation of the property to the DVO; AO invoked the provisions............. Click here to read and download ITAT order
5) ITAT: CIT(A) is bound to follow jurisdictional HC, allows Sec. 54 / 54F benefit for investment made in spouse name – ITAT holds that assessee’s jurisdiction and PAN being transferred to Delhi, jurisdiction lies with the Hon'ble Delhi High Court, follows decision reported in [TS-724-HC-2013(DEL)-O] of Delhi HC, being jurisdictional HC to grant exemption u/s. 54F towards investment in purchase of property in the name of his wife; Assessee on appeal submitted that the date on which appeal is filed would be material point of time for consideration jurisdiction; ITAT ......... Click here to read and download ITAT order
6) HC: CIT(A) has the power to decide stay petition, remands matter to CIT(A) for disposal with direction to revenue authorities “No coercive steps” against recovery – Assessee submitted that no stay petitions was filed before the AO, hence CIT(A) should not have directed to file stay petition before AO to get suitable remedy; HC considering Assessee`s submission remands the matter back to CIT(A) to dispose of stay petitions, notes that CIT(A) instead of exercising the discretion and power ......... Click here to read and download HC judgment
Access to a strong repository of Tax Rulings is a key requirement of tax professionals like yourselves. Taxsutra Database is a brand new addition to the Taxsutra bouquet of services. Largely known for its world class real time news and updates service, Taxsutra brings to you a comprehensive, easy to use Database service which offers the following features:
Over 106700+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent unreported handpicked ruling
Completely integrated service with all the latest cases powered by an advanced search engine to provide a seamless user experience
Search results supported by active filters around Court Level, Location, Case Numbers and Citation
A Unique Bulls Eye application to further enhance search by including "Exact words", "Any of these", "none of these"
The Taxsutra Database comes at a very special Annual Subscription price of 4200 + GST AND includes a annual license to the Taxsutra Library.
Secondment of employees and tax litigation; SC: Depreciation claim withdrawn during subsequent search proceedings; Fess u/s 234E can be imposed.....and lots more!
Issue No. 202 / April 15th, 2020
Dear Professionals,
“Taxsutra Database”, a true Income-tax Research is an archive of over 106700 + Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent ‘unreported handpicked ruling of SC, HC & ITAT’. A completely integrated service with all the latest cases powered by an advanced search engine to provide a seamless user experience; Search results supported by active filters around Court Level, Location, Case Numbers and Citation; A Unique Bulls Eye application to further enhance search by including "Exact words", "Any of these", "none of these"
We are glad to present to you the 202nd edition of ‘Taxsutra Database’, where we keep you updated with recent rulings.
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Taxsutra Database - Expert Column
Multinational companies often depute their employees overseas to perform certain assigned activities, to provide technical assistance, or provide skill-development opportunities to employees etc. Reimbursement of salary costs of such ‘Seconded Employees’, unless carefully structured, can result in serious tax implications, both for the Indian subsidiary and the overseas company.
In this regard, Dharan V. Gandhi ( Advocate) in Part 1 of this 3 parts article series, deals with the tax implications in respect of payment made by Indian companies to their overseas counterpart for secondment of employees, more particularly employees deputed at senior positions. In Part 2, the author shall evaluate the angle of reimbursement vis-a-vis FTS and Part 3 deals with the angle of the secondment transaction vis-a-vis constitution of a Permanent Establishment
1) ITAT: Investigation Wing is part of Income Tax Department, not an external law enforcement agency – ITAT dismisses Revenue’s appeal, holds that exception in para 10(e) of the Circular No. 3/2018 which has been referred by the ld DR relates to cases where addition is based on information received from external sources in the nature of law enforcement agencies such as CBI/ ED/ DRI/ SFIO/ Directorate General of GST Intelligence (DGGI)..............Click here for details
2) HC: Cash credited in the books of Account maintained for any previous year cannot be taxed in next financial year – Goa Bench of Bombay HC holds that as per definition of the expression “previous year” as defined in Section 3 of the IT Act, AO was not justified to bring credit found during FY 2006-07 as the assessee income for the assessment year 2009-10,..................Click here for details
3) HC: AO must establish deliberate defiance or wilful contravention of the law – HC holds that mere conclusion in the assessment order that the assessee had failed to collect the Securities Transaction Tax (STT) or had failed to pay such STT to the credit of the Central Government, would not .......... Click here for details
4) SC: Carry forward of loss cannot be disallowed merely because Returns were filed in the old form – SC dismisses Revenue’s SLP against HC order considering that assessee has filed the return of income within the due date, though it’s in old form amounts to sufficient compliance of the provision; The AO had disallowed carry forward loss relating to AY 2007-08 on the ground that the assessee did not file.......... Click here for details
5) SC: Depreciation claim withdrawn during subsequent search proceedings, would not give rise to penalty - SC dismisses Revenue’s SLP challenging HC order quashing penalty proceedings initiated u/s 271(1)(c); AO noticed that during search proceeding as per the statement u/s. 132(4) director of the company reduced the claim of depreciation on IPRs to avoid litigation and to buy peace; AO initiated and levied the penalty invoking Expl. 5A to section 271(1)(c) and CIT(A) sustained AO’s order;......... Click here for details
6) ITAT Third Member - Explanation to section 73 does not differentiate between 'delivery based transactions' and 'derivative transactions in F&O segment' and same applies to the entire business of purchase and sale of shares, whether such trading is delivery based or non-delivery based and, whether there is ............. Click here for details
7) ITAT - NRI Stayed in India for 283 days, not entitled to exemption u/s 10(4)(ii) – ITAT upholds CIT(A) order that the assessee would be a "person resident in India" as per clause (v) of section 2 of FEMA, not eligible for exemption u/s 10(4)(ii); States that exemption of interest on Non-Resident (external) accounts, both.......... Click here for details
8) HC: Fess u/s 234E can be imposed, expenses cannot be disallowed – HC holds that non-filing TDS related documents at the time of filing of return of TDS cannot take away the benefit which will accrue to the assessee under............ Click here for details
9) HC: Notice u/s 143(2) is necessary in case of assessment proceedings u/s 158BC – God Bench of Bombay HC admits cross objection filed by assessee though ITAT has not given any finding against the assessee and at the time when this Appeal was admitted no cross-objections were filed earlier as the issue, whether notice u/s 143(2) of the IT Act is necessary or not had been decided by the.............. Click here for details
Access to a strong repository of Tax Rulings is a key requirement of tax professionals like yourselves. Taxsutra Database is a brand new addition to the Taxsutra bouquet of services. Largely known for its world class real time news and updates service, Taxsutra brings to you a comprehensive, easy to use Database service which offers the following features:
Over 106700+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent unreported handpicked ruling
Completely integrated service with all the latest cases powered by an advanced search engine to provide a seamless user experience
Search results supported by active filters around Court Level, Location, Case Numbers and Citation
A Unique Bulls Eye application to further enhance search by including "Exact words", "Any of these", "none of these"
The Taxsutra Database comes at a very special Annual Subscription price of 4200 + GST AND includes a annual license to the Taxsutra Library.
ITAT: Rejects stamp-duty valuation u/s 50C as FMV for computing CG; AO justified in levying fees u/s 234E.....and more!
Issue No. 201 / April 8th, 2020
Dear Professionals,
“Taxsutra Database”, a true Income-tax Research is an archive of over 106600 + Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent ‘unreported handpicked ruling of SC, HC & ITAT’. A completely integrated service with all the latest cases powered by an advanced search engine to provide a seamless user experience; Search results supported by active filters around Court Level, Location, Case Numbers and Citation; A Unique Bulls Eye application to further enhance search by including "Exact words", "Any of these", "none of these"
We are glad to present to you the 201st edition of ‘Taxsutra Database’, where we keep you updated with recent rulings.
Key Takeaways from Handpicked rulings
1) [TS-5083-HC-2020(MADRAS)-O] - HC: Dismisses writ against jurisdiction transfer u/s. 127; No explanation for the delay in challenge - HC observes that pursuant to search proceedings carried out at different places in case of assessees group companies, Commissioner transferred their pending assessments to one particular place for centralisation of cases and for effective and coordinated investigation after...............
2) [TS-5430-ITAT-2020(Kolkata)-O] - ITAT: Scrutiny notice u/s. 143(2) issued by ITO invalid when same is to be issued by Deputy Commissioner or Assistant Commissioner – ITAT holds scrutiny notice u/s 143(2) issued by ITO as invalid and consequential assessment framed by Deputy Commissioner is void; Quashes assessment order u/s 143(3), follows precedents to observe that …….........
3)[TS-5298-ITAT-2020(INDORE)-O] - ITAT : AO justified in levying fees u/s 234E if TDS return filed beyond 1.6.2015, deletes fees for the period prior to 01.06.2015 - ITAT holds that where the delay in filing TDS return continues beyond 1.06.2015, AO is well within his jurisdiction to levy fees u/s 234E for the period starting 1.06.2015 to the date of actual filing; ITAT directs Revenue authorities to make necessary verification and delete fee u/s 234E for the delay in filing returns for the period prior to 01.06.2015 and confirms the remaining fee levied for the default committed from 01.06.2015 onwards;
4) [TS-5015-HC-2020(BOMBAY)-O] - HC: Once assessment gets abated, it is open for the assessee to lodge a new claim in a proceeding u/s 153A(1) which was not claimed in his regular return of income – HC rules in assessee’s favour, holds that return of income filed u/s 153A(1) would be construed to be one filed under Section 139(1); HC notes that, at the time search was conducted, assessment for A.Y 2008-09 was pending……...........
5) [TS-5074-ITAT-2020(MUMBAI)-O] - ITAT : Assessee has the right to change method of accounting over the present method - ITAT holds assessee justified in changing the method of accounting to give better treatment to project management expenditure; Assessee-company (engaged in real-estate development projects, SEZ, IT Parks, etc) was allotted lease of industrial land by KIADB; According to the assessee, the change in accounting method for accounting project management expenses was due to temporarily suspension of construction activities due to non allotment of the entire parcel of land by the .......................
6) [TS-5425-ITAT-2020(Mumbai)-O] - ITAT: No addition of unexplained cash credit u/s 68 on unsecured loan obtained and repaid along with interest - ITAT holds that assessee proved the identity of the lender, their creditworthiness and genuineness of the transactions, onus was on revenue to rebut the same; ITAT notes that ...................
7) [TS-8741-ITAT-2019(Mumbai)-O] - ITAT: Rejects stamp-duty valuation u/s 50C as FMV for computing capital gains considering serious restrictions on rights of the seller – ITAT holds that higher stamp duty valuation of property for the purpose of the sale deed cannot be adopted as a fair market value (FMV) for the purpose of computation of capital gains; Directs AO to adopt the deed sale consideration at Rs. 50 lakh and compute as long term capital gains (LTCG); Accepts sale consideration on which the transaction is actually taken place, being an arm’s length transaction as......................
8) [TS-5433-ITAT-2020(AMRITSAR)-O] - ITAT: Notice served through affixture at assessee's (Non-resident) last known address, sufficient – ITAT Upholds CIT(A) order, holds that AO was justified in sending notice u/s 148 through affixture at the last known address as reflected in the registered sale deed, as this being a none PAN case; Rejects assessees contention that the service of notice is not as per section 282; ITAT notes that..................
9) [TS-5320-SC-2019-O] - SC: Contents of memory card / pen drive being electronic record must be regarded ‘as a document’ as envisaged by the Information and Technology Act and cannot be regarded as a material object – SC holds that as per provisions of Sec. 2(1)(t) of the IT Act, 2000, an electronic record is not confined to "data" alone, but it also means the record or data generated, received or sent in electronic form; The expression "data" includes a.......................
Access to a strong repository of Tax Rulings is a key requirement of tax professionals like yourselves. Taxsutra Database is a brand new addition to the Taxsutra bouquet of services. Largely known for its world class real time news and updates service, Taxsutra brings to you a comprehensive, easy to use Database service which offers the following features:
Over 106600+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent unreported handpicked ruling
Completely integrated service with all the latest cases powered by an advanced search engine to provide a seamless user experience
Search results supported by active filters around Court Level, Location, Case Numbers and Citation
A Unique Bulls Eye application to further enhance search by including "Exact words", "Any of these", "none of these"
The Taxsutra Database comes at a very special Annual Subscription price of 4200 + GST AND includes a annual license to the Taxsutra Library.
The Taxation Ordinance, 2020; Insight - The clause “Make available”, Cross charge on deputation of “employees” - Part 3 and lots more!!
Issue No. 200 / April 1st, 2020
Dear Patrons,
Taxability of ‘Fees for technical services’ / 'Fees for included services' in matters of cross border deputation of employees is one of the most contentious issues with the Income Tax Department trying to bring such payment within the ambit of Fees for Technical Service. One of the most significant issues is the tax liability of the non-resident on the income proposed to be generated in India on provision of managerial, technical or consultancy services in India. As per the terms of agreement, either the Indian entity or the Foreign Company pays salary to the said employees on deputation. Owing to the discrepancy in the view of courts in interpretation of the legal propositions, it is difficult to establish a principle for ascertaining the taxability of expatriate employees.
In continuation of our Taxsutra Database Insight Part 2 wherein, we presented 8 landmark rulings on the issue, we bring to youPart-3 comprising of 8 more rulings on the issue covering aspects such as technical services ‘made available’ through deputed personnel, whether the salary recharge on their behalf amounts to FTS or are mere reimbursements; whether payments for ‘managerial services’ amounts to FTS under the India-France DTAA; deductibility of salary expenses of seconded employees upon constitution of service PE and more...
Access to a strong repository of Tax Rulings is a key requirement of tax professionals like yourselves. Taxsutra Database is a brand new addition to the Taxsutra bouquet of services. Largely known for its world class real time news and updates service, Taxsutra brings to you a comprehensive, easy to use Database service which offers the following features:
Over 106450+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent unreported handpicked ruling
Completely integrated service with all the latest cases powered by an advanced search engine to provide a seamless user experience
Search results supported by active filters around Court Level, Location, Case Numbers and Citation
A Unique Bulls Eye application to further enhance search by including "Exact words", "Any of these", "none of these"
The Taxsutra Database comes at a very special Annual Subscription price of 4200 + GST AND includes a annual license to the Taxsutra Library.
In this regard Jatin Proothi (Chartered Accountant) in his article highlights that in many cases it was not possible to satisfy the CIT(E)s about whether the activities of the trust are genuine or not as required by sub clause (i) of clause (a) of sub section (1) of Section 12AA. The author examines the SC judgment to opine that it will save many newly registered public charitable or religious trust on the issue of grant of registration u/s 12A without any activities carried on by them. 
To determine how business should prepare to take appropriate mitigating action, Sachin Kumar BP, (Partner Manohar Chowdhry & Associates) and Nitish Ranjan (Associate) discuss the unintended tax consequences for Foreign Portfolio investments and Private equity funds based in Mauritius or Singapore, in a situation where managers thereof are temporarily away from home country and are stranded in the host country (India). The authors' inter-alia suggest robust documentation of the employees details setting out the intention of the parties to be able to take support from the guidance by OECD to mitigate Service PE/POEM exposure .
In continuation of our Taxsutra Database Insight