Taxsutra Database Bulletin : Corpus-Specific Voluntary Contributions of Unregistered Trust; Directions by DRP and Other Handpicked Rulings
Issue No. 123 / Feb 22, 2018
1. [TS-5242-ITAT-2018(Pune)-O] : Corpus-specific voluntary contributions of unregistered trust : Corpus specific voluntary contributions are outside scope of taxation in case of an unregistered Trust u/s. 12/ 12A/ 12AAA - ITAT rules in favour of assessee; Holds that “provisions of section 2(24)(iia)/ 12(1)/ 11(1)(d)/ 35/ 56(2) are relevant for deciding the current issue. It is a settled legal proposition, in case of a registered Trust under the Income-Tax Act, that corpus-specific Voluntary Contributions are outside the scope of ‘income’ as defined in s. 2(24)(iia) of the Act due to their "capital nature". But it is a case of an unregistered Trust. … principles relating to judicial discipline assume significance and the priority. It is also decided issue that there is need for upholding the favourable view if there exists divergent views on the issue. ”…
Editorial Note :Agra ITAT in Gaudiya Granth Anuved Trust[TS-6035-ITAT-2013(AGRA)-O] held that corpus donation is in the nature of a capital receipt and are not taxable, irrespective of the fact whether the trust is registered u/s. 12AA or not.
SC in Radhasoami Satsang [TS-12-SC-1991-O] had held that no formal document is necessary to create a trust.
2. [TS-8445-ITAT-2017(Mumbai)-O] : Taxability of discount on ESOP : Discount on shares issued in ESOP is an allowable expenditure, and not a contingent liability - ITAT rules in favour of assessee; Sets aside CIT’s order u/s. 263 wherein he has expressed his opinion that the assessee's claim of expenditure towards employee cost on account of equity stock options was payable in future, and was an unascertained liability which cannot be allowed as an expenditure since the same is relatable towards future pending obligation not determinable with reasonable certainty in the year of accounting…
3. [TS-5387-ITAT-2018(Bangalore)-O] : Directions by DRP : Order passed by DRP u/s. 154 is not appealable - ITAT rules in favour of assessee; Holds that Revenue’s appeal against DRP’s directions is not maintainable; Notes that as per Sec. 253(1)(d), an order passed by the AO under Sec. 143(3) or Sec. 147 or Sec. 153A or Sec. 153C pursuant to DRP’s directions, or an order passed u/s. 154 in respect of such order, is appealable before the Tribunal and not DRP’s order u/s. 154…
4. [TS-5468-ITAT-2018(Chandigarh)-O] : Taxability of interest on NPAs : Taxability of interest on loans categorized as NPA’s/ sticky loans to be on receipt basis - ITAT rules in favour of assessee; Holds that interest on NPA’s was being accounted for on receipt basis consistently in the past also, following Accounting Standard-9 relating to Revenue Recognition prescribed by Institute of Chartered Accountants of India, which required income to be recognized only on becoming certain, and the method followed by assessee was in consonance with the guidelines issued by Reserve Bank of India from time to time…
Taxsutra Database Insight - Part 2: Amnesty Scheme - Effect of pendency of Assessee and Dept. appeal - Disputed Tax & Arrears...and more!
Issue No. 194 / February 19th, 2020
Dear Patrons,
As Govt. of India aims to settle the unresolved issues with the 'Direct Tax Vivad se Vishwas Bill, 2020' [“The Scheme”], the Union Cabinet approved amendments to “The Scheme” with a view to increase its scope to cover litigations pending in revision, arbitration, DRP cases, etc.
The Finance Minister in her Budget speech while introducing the Scheme announced that, Taxpayers in “whose” case appeals are pending at any level can take the benefit from this scheme. However as per the Bill No. 29 of 2020 [“Vivad se Vishwas Bill, 2020”], introduced in LOK SABHA, in definition section 2(1)(a), the term used is "appellant" [which includes ‘The person or the income-tax authority or both’] while Sec. 2(1)(c) its "declarant" means a person who files declaration u/s 4.
At Taxsutra Database Insight Part 2, we bring to you rulings on certain key principles which examine whether “the scheme” applies to appeals by both the “Assessee” and the “Departmental”, effect of pendency of Departmental Appeal, power of AO to reopen assessment once tax arrears determined “the Scheme”, whether delay in payment of tax can be condoned or Amount Paid under Protest can be considered?
Read Here - Taxsutra Database Insight - Part 2: Amnesty Scheme - Effect of pendency of Assessee and Departmental appeal - Disputed tax and Tax arrears;
Read Here - Taxsutra Database Insight - Part-1:Amnesty Scheme - Interpretation of the word "Admitted and Pending"
Finance Bill, 2020 has proposed a major concession and in order to bring uniformity between the co-operative societies and corporates, Finance Minister Nirmala Sitharaman proposed reduction of tax on Co-operative societies to 22 per cent plus surcharge and cess with no exemptions / deductions, from 30 per cent at present. Further to enlarge the scope of the section 194A(3)(v) , Finance Bill 2020 proposes co-operative societies are liable to deduct tax.
Author, CA Ashok Mudnur analyses the implications of Section 115BAD and infers that post Budget 2020, if a resident Co-operative bank opts to pay Tax under the new regime, it will save 9.77% on income tax. The Author cautions Co-operative Societies that exemption u/s 80P may be denied to those who have violated provisions of State Co-operative laws, hence it would be wise to choose new tax regime 115BAD. Presently, interest credited or paid by a co-operative society to a member or to any other co-operative society is not liable for tax deduction at source in view of section 194A(3)(v). The Author examines the impact of the proposed amendment in Sec. 194A(3)(v) w.e.f 01.04.2020, and points out that now Big Co-operative societies, having gross receipts exceeds Rs. 50 crore during the last financial year, would be required to deduct tax from interest credited or paid if the amount of interest is more than Rs. 50,000 in case of payee being a senior citizen and Rs. 40,000 in any other case;
Finance Bill, 2020 proposed to amend Section 43CA, 50C and 56 of the IT Act to increase in the safe harbour limit from 105% to 110%. It becomes an utmost aspect of concern that many times, there is a significant variation in the value of the properties within same locality considering which, the Courts, have in many occasions held that if the margin between the value as given by the assessee and the Departmental valuer is less than 10%, then this difference is liable to be ignored, has some merit.
Author Dharan V Gandhi, Advocate in his opening remarks quotes "Everything is fair in love and war" is now modified to "everything is fair in love, war and tax evasion". The Author examines various Judicial precedents and welcomes Finance Bill 2020, however cautions that they were late to recognise this concept itself, the limit itself was set at a meagre figure of 5%; The Author stating that u/s 50C & 56(2)(x) the FMV has to be determined on the basis of one ad-hoc method which is prescribed in Rule 11UA of the Income-tax Rules, 1962, concludes that “Such method is an absurd and vague one and there is no safe harbour provision in such cases, which is the need of the hour, considering the fact that great damage is caused otherwise.”
Read Herearticle titled - Increase in safe harbour limits on property valuations, a welcome move!
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Over 105800+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent unreported handpicked ruling with VECS summary
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Taxsutra Database Insight Part - 1: Amnesty Scheme - Interpretation of the word "Admitted and Pending"; Budget 2020 - Proposals Relating To Charity Institutions
Issue No. 193 / February 12th, 2020
Dear Patrons,
The Govt. of India has been offering amnesty schemes practically every ten years to put an end to litigation in various forms and at various stages under Direct & Indirect Tax and the Schemes have been described as the “very last opportunity”. The constitutional validity of VDIS, 1997 was challenged at SC in the case of AIFTP vs UOI [TS-5092-SC-1997-O] and SC upheld the constitutional validity of the amnesty scheme rejecting the contention that more benefits are given to tax-evaders, the provisions of the scheme are arbitrary and violative of Art. 14 of the Constitution of India.
In the line of SVLDRs, Finance Minister, in her recent budget speech, introduced the scheme “The Direct Tax Vivad Se Vishwas Bill, 2020” (“the Bill”) (subsequently introduced in the “Lok Sabha”) to provide for resolution for the pending “direct tax disputes” and proposed waiver of interest & penalty provided the disputed tax amount is paid by March, 2020. The Scheme is to remain open upto June 2020. As per “the Bill”, any Taxpayer whose appeal is pending as on 31st January 2020 before any appellate forum [i.e., SC, HC, ITAT and CIT(A)] is eligible to avail the Scheme.
At Taxsutra Database Insight Part-1, we bring to you key rulings on principles which examine and interpret the words "Admitted and Pending" in the context of an appeal before an appellate forum. In Parts 2 & 3 at Taxsutra Database Insight we will focus on other issues pertaining to Amnesty scheme similar to 1) Delayed appeal 2) Eligible legal entities 3) Appeal against fee u/s 234E ...etc and more!
Read HereTaxsutra Database Insight Part-1:Amnesty Scheme - Interpretation of the word "Admitted and Pending"
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Post Budget 2020 - Expert Columns
The Finance Bill, 2020 proposes to make a plethora of procedural changes in the matter of granting exemption to Charitable Institutions from income tax and continuance thereof. Author Dindayal Dhandaria, Chartered Accountant, examines the nuances of the proposals and their impact on the charity institutions.
The author contemplates that the electronic process of registration and the automatic grant of URN will remove hardships caused due to loss of registration certificate and/or number. The author discusses the proposal to fix the duration of registration for 5 years and subject to examination by the authorities after every 5 years, without a provision for condonation for delay in applying for renewal of registration, and opines it as a cumbersome one, keeping the assessees on toes. Further, speaking of provisional registrations, the author ponders on what would happen in the eventuality of no commencement of activities of the Trust for a long period in absence of provision for renewal of the Provisional Registration. The author also points out at lack of clarity on how the income of the provisionally registered charity institution between the periods from its formation till rejection of its application would be taxed or dealt with if its application is not approved.
Read here article titled - Proposals Relating to Charity Institutions in Finance Bill, 2020 -"Vishwas To Vivad"!
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The Direct Tax Vivad Se Vishwas Bill, 2020 [“Bill”] was introduced in Lok Sabha on Dec 5th 2020 to reduce pending litigation related to Direct Taxes. The Bill will be enacted as law once it is approved by both houses of the Indian Parliament.
Author V P GUPTA , Advocate examines the proposals introduced in Bill to settle long pending appeals before all forums [SC, HC, ITAT & CIT(A)] and seeks clarification to avoid any risk of Tax Calculation in terms of Section 3. The author opines that the scheme should provide for adjustment in the amount of loss to be carried forward to avoid double payment of tax. He further opines that the periods mentioned in Section 5 of the scheme are not linked with the dates for payment mentioned in section 3 of the Bill i.e. 31.03.2020 or thereafter and states that this position needs to be clarified and dates have to be co-related.
Read here article titled – “Vivad Se Vishwas Scheme” - Broad Features and Clarifications required
Lot's more at Taxsutra Database
Click here to access all “Taxsutra Database Newsletters”, in case you have missed any!
Read here - Latest News, CBDT clarification...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 105500+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent unreported handpicked ruling with VECS summary
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 3400 + GST AND includes a annual license to the Taxsutra Library.
Click here to sign up, make payment and join the Taxsutra Family.
Taxsutra Database Post Budget 2020: Taxing non-residents on citizenship criteria; DDT abolished & Proposed amendment u/s 194J...and more!
Issue No. 192 / February 05th, 2020
Dear Patrons,
The Union Budget 2020, presented by Hon’ble Finance Minister Nirmala Sitharaman on 1st Feb, 2020 has announced a new regime for individual taxpayers to make a choice between the old and new regimes with an objective that the taxpayers would be able to file their Income tax returns themselves; Amongst the various proposals contained in the Union Budget 2020-21 in the form of Finance Bill, 2020, at Taxsutra database Budget special, we bring to you Snapshot of 11 important proposed amendments and articles by three authors discussing the important proposals of the Budget.
Read here - Snapshot of Direct Tax Proposals in Budget 2020
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Post Budget 2020 - Expert Columns
Finance BILL, 2020 proposes to amend the tax residency of non-residents by inserting sub-section (1A) to Section 6 to deem an Indian Citizen to be resident in India, if such an individual is not liable to tax in any other country or territory by reason of his residence or domicile or any other criteria of similar nature.
Author CA Shyam Nori discusses the proposed anti-abuse measure by looking at: what the expression ‘Liable to tax’ means, stateless person, conflict between Finance Bill and memorandum, and in the context of treaty. The author elucidates that “Liable to tax doesn’t necessarily mean subject to tax”. In this context a reference is made to SC decision in Azadi Bachao Andolan which clarified that “'liable to tax' connotes that a person is subject to one of the taxes mentioned in Article 2 in a Contracting State and it is immaterial whether the person actually pays the tax or not”. The author further highlights that the amended section does not meet the intention of the amendment as stated in the memorandum i.e., anti-abuse measure to address statelessness as a person cannot be said to be not liable to tax, if the person were to be resident of a country and the income earned may not be subject to tax, but the person is liable to tax. Speaking of the CBDT clarification on the amendment stating that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India, shall not be taxed in India unless it is derived from an Indian business or profession, the author opines that “This would put to rest any concerns the Indian citizens, who are tax residents elsewhere but not liable to tax, may have about getting taxed in India. This would equally be the case with non-treaty countries.”
Read here the article titled - Taxing non-residents on citizenship criteria
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The Union Budget 2020 has proposed, of what can be termed as a sigh of relief especially to the India inbound investors community and is likely to attract foreign investments. Finance Minister Mrs. Nirmala Seetharaman has proposed to make the provisions of section 115-O redundant and inoperative, in a move to tax the shareholders in the conventional manner and has further, proposed to introduce a new section 80M, to avoid any cascading effect, in the case of distribution of dividends through multiple layers of holding companies before reaching the ultimate shareholders.
Authors Deepak Manoharan and Nathansha Dilip, (Chartered Accountants) evaluate the impact of the proposed amendments. In the context of its impact on foreign investors in light of higher tax rates in India, the authors opine that “...foreign companies can now pay taxes on dividend at this reduced rate and claim the credit of the same in the country of residence.”. Speaking of the reduction of tax cost that the amendment brings about to companies, the authors state that “This also diminishes the upper hand an LLP structure had over a company.”. Going by the sign of impetus that the Government is providing towards inclusive growth, they sign off with an anticipation that “It may not be surprising if the Government does away with the provisions of buyback tax as well, which was introduced as a measure to counter the alternate repatriation strategy adopted to avert DDT”
Read here the article titled: DDT abolished – The boon of the decade for India inbound investors!
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In its endeavor to reduce tax litigation, Government in the Budget 2020 has taken quite a few steps. One such step which is likely to be very effective is the proposal to reduce the rate of TDS u/s. 194J in cases of fees for technical services (other than professional services) from 10% to 2% to bring it on par with rates as provided u/s. 194C for any work pursuant to a contract.
Authors Dindayal Dhandaria & CA Naveen Kumar Dhandaria (Chartered Accountants), while discussing the proposal state that “It is heartening to note that the Finance Bill, 2020 proposes to amend the existing provisions of section 194J of Income tax Act, 1961 (“the Act”) with a view to reducing litigation and to provide certainty in tax matters”. The authors highlight and discuss certain cases where this dispute has arisen. The authors sign of with a suggestion that similar to the different rates provided u/s. 194C based on the payees’ status (i.e., individual/HUFs & Others), “It is desirable that in section 194J also, different rates for deduction of tax at source from ‘fee or technical services” should be prescribed depending upon the payees concerned as is provided in section 194C.”
Read here the article titled - Proposed amendment u/s 194J would reduce litigation and not eliminate it?
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Read here - Speech of Nirmala Sitharaman, Minister of Finance with “Annex B in Direct tax”
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 105500+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent unreported handpicked ruling with VECS summary
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Taxsutra Database Insight: Royalty / FTS - Supply of designs & drawings; Budget expectation- Controversy over delayed contribution towards PF / ESI
Issue No. 191 / January 29th, 2020
Dear Patrons,
The ’make available‘ clause in respect of Fees for Included Services (FIS)/ Fees for Technical Services (FTS) is more or less similarly defined under the Income Tax Act and under several DTAAs. We have various HC, AAR and ITAT rulings that have held that an amount paid for technical services would be considered as FTS only if the services paid for ‘made available’ the technical knowledge, experience, skill, know-how or processes. In 2017, the Gujarat HC order reported in [TS-6865-HC-2017(Gujarat)-O]admitted an appeal filed by the Revenue against the ITAT’s order, holding that payment made to a non-resident company did not fall within the definition of Fees for Technical Services in view of the ’make available‘ clause in the concerned treaty, although the AO had given a categorical finding that ‘make available’ clause is not necessary for treating a payment as Fees for Included Services under the DTAA, as there is development & transfer of a technical plan or technical design to the assessee by the Canadian party.
In the “Taxsutra Database Insight” Issue No. 191, we have compiled 30 rulings on issues arising specifically on the question whether payments towards supply of designs & drawings are “Royalty” u/s 9(1)(vi)” or FTS/ FIS. Some of these cases have also examined whether the foreign entity had a PE in India.
Read here: Taxsutra Database Insight - “Make available” – Payment towards supply of designs & drawings whether Royalty u/s 9(1)(vi)?
There is a fervent debate regarding disallowance of employees’ contribution of provident fund post the “due date” and inclusion of such contribution as income of the employer owing to conflicting judgments of various high courts and the CBDT Circular No. 22/2015, dated 17-12-2015. Authors CA T G Suresh (Partner, Suresh & Balaji) and Arjun Suresh
In their article discuss the attempt made to justify the reasons for making an amendment in the upcoming budget to put an end to this controversy. Pondering on the different treatments given by the Government to contributions made by employer and employee, authors state that “They are constructively two parts of the same payment and ...there is no concrete rationale to separate the two and make it operate as two different transactions.” The Authors further discuss the impact of the CBDT Circular which sought to withdraw all litigation made with regards to Section 43B but however made a specific statement that this shall not affect any claim or litigation with respect to Section 36(1)(va). The authors opine that if this circular is not intended to be applicable to the employee’s contribution , one cannot understand the logical reason behind its issuance after nearly 6 years of SC decision which had held that that the omission of the Second proviso of Sec. 43B as curative in nature and hence would operate retrospectively. The authors sign off with a remark that “Considering the keenness of the Government to reduce the litigation and improve the ease of doing business , let’s hope that the upcoming budget makes a deserving amendment in either in Sec 36(1) (va) or sec 43 B so that this controversy can be finally put to rest.”
Read herethe article titled – Budget expectation on controversy over delayed deposits of employees' contribution of PF / ESI
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 105500+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR(Trib) and which also includes recent unreported handpicked ruling with VECS summary
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 3400 + GST AND includes a annual license to the Taxsutra Library.
Click here to sign up, make payment and join the Taxsutra Family.
Author, CA Ashok Mudnur analyses the implications of Section 115BAD and infers that post Budget 2020, if a resident Co-operative bank opts to pay Tax under the new regime, it will save 9.77% on income tax. The Author cautions Co-operative Societies that exemption u/s 80P may be denied to those who have violated provisions of State Co-operative laws, hence it would be wise to choose new tax regime 115BAD. Presently, interest credited or paid by a co-operative society to a member or to any other co-operative society is not liable for tax deduction at source in view of section 194A(3)(v). The Author examines the impact of the proposed amendment in Sec. 194A(3)(v) w.e.f 01.04.2020, and points out that now Big Co-operative societies, having gross receipts exceeds Rs. 50 crore during the last financial year, would be required to deduct tax from interest credited or paid if the amount of interest is more than Rs. 50,000 in case of payee being a senior citizen and Rs. 40,000 in any other case;
Author Dharan V Gandhi, Advocate in his opening remarks quotes "Everything is fair in love and war" is now modified to "everything is fair in love, war and tax evasion". The Author examines various Judicial precedents and welcomes Finance Bill 2020, however cautions that they were late to recognise this concept itself, the limit itself was set at a meagre figure of 5%; The Author stating that u/s 50C & 56(2)(x) the FMV has to be determined on the basis of one ad-hoc method which is prescribed in Rule 11UA of the Income-tax Rules, 1962, concludes that “Such method is an absurd and vague one and there is no safe harbour provision in such cases, which is the need of the hour, considering the fact that great damage is caused otherwise.”
At Taxsutra Database Insight Part-1, we bring to you key rulings on principles which examine and interpret the words "Admitted and Pending" in the context of an appeal before an appellate forum. In Parts 2 & 3 at Taxsutra Database Insight we will focus on other issues pertaining to Amnesty scheme similar to 1) Delayed appeal 2) Eligible legal entities 3) Appeal against fee u/s 234E ...etc and more!
Author CA Shyam Nori discusses the proposed anti-abuse measure by looking at: what the expression ‘Liable to tax’ means, stateless person, conflict between Finance Bill and memorandum, and in the context of treaty. The author elucidates that “Liable to tax doesn’t necessarily mean subject to tax”. In this context a reference is made to SC decision in Azadi Bachao Andolan which clarified that “'liable to tax' connotes that a person is subject to one of the taxes mentioned in Article 2 in a Contracting State and it is immaterial whether the person actually pays the tax or not”. The author further highlights that the amended section does not meet the intention of the amendment as stated in the memorandum i.e., anti-abuse measure to address statelessness as a person cannot be said to be not liable to tax, if the person were to be resident of a country and the income earned may not be subject to tax, but the person is liable to tax. Speaking of the CBDT clarification on the amendment stating that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India, shall not be taxed in India unless it is derived from an Indian business or profession, the author opines that “This would put to rest any concerns the Indian citizens, who are tax residents elsewhere but not liable to tax, may have about getting taxed in India. This would equally be the case with non-treaty countries.”
Authors Deepak Manoharan and Nathansha Dilip, (Chartered Accountants) evaluate the impact of the proposed amendments. In the context of its impact on foreign investors in light of higher tax rates in India, the authors opine that “...foreign companies can now pay taxes on dividend at this reduced rate and claim the credit of the same in the country of residence.”. Speaking of the reduction of tax cost that the amendment brings about to companies, the authors state that “This also diminishes the upper hand an LLP structure had over a company.”. Going by the sign of impetus that the Government is providing towards inclusive growth, they sign off with an anticipation that “It may not be surprising if the Government does away with the provisions of buyback tax as well, which was introduced as a measure to counter the alternate repatriation strategy adopted to avert DDT” 
Authors Dindayal Dhandaria & CA Naveen Kumar Dhandaria (Chartered Accountants), while discussing the proposal state that “It is heartening to note that the Finance Bill, 2020 proposes to amend the existing provisions of section 194J of Income tax Act, 1961 (“the Act”) with a view to reducing litigation and to provide certainty in tax matters”. The authors highlight and discuss certain cases where this dispute has arisen. The authors sign of with a suggestion that similar to the different rates provided u/s. 194C based on the payees’ status (i.e., individual/HUFs & Others), “It is desirable that in section 194J also, different rates for deduction of tax at source from ‘fee or technical services” should be prescribed depending upon the payees concerned as is provided in section 194C.”
In their article discuss the attempt made to justify the reasons for making an amendment in the upcoming budget to put an end to this controversy. Pondering on the different treatments given by the Government to contributions made by employer and employee, authors state that “They are constructively two parts of the same payment and ...there is no concrete rationale to separate the two and make it operate as two different transactions.” The Authors further discuss the impact of the CBDT Circular which sought to withdraw all litigation made with regards to Section 43B but however made a specific statement that this shall not affect any claim or litigation with respect to Section 36(1)(va). The authors opine that if this circular is not intended to be applicable to the employee’s contribution , one cannot understand the logical reason behind its issuance after nearly 6 years of SC decision which had held that that the omission of the Second proviso of Sec. 43B as curative in nature and hence would operate retrospectively. The authors sign off with a remark that “Considering the keenness of the Government to reduce the litigation and improve the ease of doing business , let’s hope that the upcoming budget makes a deserving amendment in either in Sec 36(1) (va) or sec 43 B so that this controversy can be finally put to rest.”