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Mr. Ishu Garg (Intern, SGPM & Associates) points out that Section 194R does not cover the perquisites covered under the head of salary income u/s 17(2) and its scope is limited to the perks or benefits provided in lieu of business/ profession carried on by the recipient; In light of the CBDT guidelines, the author remarks that, “the clarification regarding out of pocket expenses is something that would need an extra attention by the taxpayer.”; Highlights that the term “any benefit or perquisite, whether convertible into money or not” widens the scope of the provisions and covers diverse nature of transactions such as medicine samples received by medical practitioners or products retained by social media influencers; The author concludes that, “CBDT is quiet on time in bringing these guidelines to reduce the challenges to be faced by the Taxpayers”;|
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Mr. Dharan Gandhi (Advocate) analyses the Supreme Court decision together with the CBDT Instruction and highlights the issues arising out of such Instruction. The author contemplates the term, "to travel back in time" used in the CBDT Instruction in the context of application of amended Section 149 and apprise that the theory of travel back in time was specifically negated by the High Courts. The author highlights the Supreme Court direction that the notices u/s 148 be deemed to be issued u/s 148A(b) of the Act, however all the defences of the assessees have been kept open and opines that, "Court has only dispensed with the prior inquiries u/s 148A(a) of the Act, but has not dealt with the approval of specified authority u/s 148A(b) of the Act." The author lastly emphasises that the CBDT Instruction only represents the views of the Department on the Supreme Court Judgment and the same is not binding on anyone except the Revenue.
Mr. Viral Shah (Chartered Accountant) in this article discusses the Supreme Court decision wherein it is directed that the notices issued u/s 148 aissued after April 1, 2021 under the old regime will be deemed to have been issued u/s 148A(b) under the new regime. To provide the background of the controversy the author highlights that the notices were issued under the old regime pursuant to the extension granted vide Notifications dated March 31, 2021 and April 21, 2021, meanwhile the old reassessment regime was substituted by new reassessment regime vide Finance Act 2021. The author emphasises that the High Courts of the various jurisdictions have quashed the reopening of assessment under the old regime, however, SC has validated such notices deeming it to be issued under new provisions. The author underscores that the Supreme Court invoked the provisions of Article 142 of the Constitution of India whereby the present order shall be governing cases where orders are passed by the HC as well as where appeals on similar matters are pending before the HC at PAN India level. The author opines that the Supreme Court order has definitely quietus the litigative issue which was persisting PAN India, however, it will likely be the source of new litigation issues.Issue No. 259 / April 28, 2022
Dear Professionals,
We are glad to present to you the 259th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
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Judicial “forward & backward reference”
a) [TS-7445-ITAT-2017(Jaipur)-O] Affirmed by HC, [TS-9617-HC-2018(Rajasthan)-O] on addition u/s 56(1) and HC order reversed by SC in, [TS-5011-SC-2022-O]
b) [TS-8166-ITAT-2021(Bangalore)-O] followed in [TS-5541-ITAT-2022(Chennai)-O] on payments for online advertising and marketing to non-resident payees not within meaning of ‘Royalty’
c) [TS-5411-ITAT-2020(Mumbai)-O] followed in [TS-5534-ITAT-2022(Mumbai)-O] on draft assessment order was not required to be issued for the period prior to 1st April 2020
d) [TS-5828-HC-2014(ANDHRA PRADESH & TELANGANA)-O] distinguish in [TS-6722-HC-2021(Telangana)-O] on cash credit u/s 68 cannot be extended to unexplained investments u/s 69A
e) [TS-7580-HC-2018(Gujarat)-O] followed in [TS-5058-HC-2022(Calcutta)-O] on valuation of closing stock
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Expert Column
Recently, CBDT notified the ITR for AY 2022-23. Though the tax law itself has not substantially changed, some very important changes feature in the new ITR Forms.
Dr. CA Abhishek Murali (President, All India Taxpayers' Association (AITPA)) provides a lucid comparative analysis of ITR for current AY vis-à-vis ITR for last year. He suggests that the taxpayers should wait till the end of June for filing the return despite ITRs being notified. He explains that “Though the Income Tax Forms have been made available already, the Income Tax Filing process will only effectively start from the month of June, when all Taxpayers have filed their TDS returns. Only on filing the TDS return can the Form 26AS of Taxpayers' reflect the true position of their incomes and their tax credits.” He states that many salaried employees who filed the return of income in a simple manner by just copying and pasting their Form 16 are in for a surprise and discusses the importance of corroboration of information with AIR and TIS in addition to form 26AS.
Click here to read the article titled "Comparative Analysis of ITR"
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Key Takeaways from Handpicked Rulings
1) SC: Expresses reservation on HC's observation that CIT cannot examine merit while exercising revisionary powers, but dismisses SLP……….. Click here to read and download SC Order
2) ITAT: Ignorance of law not a reasonable cause for deleting penalty u/s 271B – ITAT upholds CIT(A) order, rejects assessee's plea that ignorance of law as a reasonable cause u/s.273 for deleting the impugned penalty; Notes that assessee, a salaried employee, indulged in trading in shares & derivatives / F&O and achieved a total turnover which is more than the threshold limit of Rs.1 Cr. stipulated u/s.44AB of the Act for compulsory audit of books of account; Also notes that the assessee is a well-educated person and employed with Cognizant Technologies and maintained the regular books of account for computing income/loss from the business, thus, cannot take the ground of ignorance of law in so far as getting the books of account audited in terms of Section 44AB on or before the specified date; ITAT finds no merits in assessee's vehement contentions and holds that mere ignorance of law pleaded herein at the assessee’s behest hardly deserves to be treated as a reasonable cause for disturbing the impugned penalty as upheld in the CIT(A)’s lower appellate discussion…………….Click here to read and download ITAT Order
Editorial Note: ITAT in [TS-5065-ITAT-2012(CHENNAI)-O] held that penalty must be levied unless the assessee shows that sufficient reasons were prevalent to justify the omission caused. Even though evidence cannot be produced in all cases, the explanations offered by an assessee must be plausible and convincing and answerable to the reasoning of a man of ordinary prudence.
3) HC: Holds Sec. 32(2)(a) of Benami Act as unconstitutional; Directs Govt. to frame provision in light of SC ruling in R.Gandhi’s case, immediately - HC allows writ petition challenging provisions of Section 32(2)(a) that mandates appointment of judicial member of the Appellate Tribunal under the Benami Act who has been a member of the Indian Legal Services and held the post of Addl. Secretary or equivalent; HC analyses various SC rulings on the appointment of tribunal members viz., S.P. Sampath Kumar, R. Gandhi and also relied on coordinate bench ruling in Shamnad Basheer in the context of the Intellectual Property Appellate Board where considering the issue that the proceedings before the Tribunal would be judicial in nature, the necessity for appointment of a member from the judiciary or the bar was realized and for the reason that prior to constitution of the Tribunal, the adjudication was done by Courts; Thus, adopting the Westminister policy which prescribes the qualification akin to that of the judicial officer who has been dealing with such matters prior to the constitution of the tribunal, the necessity and importance of a judicial member and, that too, a person who served as a Judge or a member of the Bar was felt and, accordingly, the coordinate bench held certain provisions of the Trademarks Act, 1999 and the Patents Act, 1970 to be unconstitutional; HC, thus, directs the Central Government to frame the provision keeping in mind the directions of the Apex Court in the case of R. Gandhi which was followed by the coordinate bench in Shamnad Basheer’s case and bring the amendment immediately………………. Click here to read and download HC Judgment
4) HC: Remands Tata Teleservices' stay application over deposit of less than 20% of demand - HC holds that the requirement of payment of twenty percent (20%) of disputed tax demand is not a pre-requisite for putting in abeyance recovery of demand pending first appeal in all cases; The said pre-condition of deposit of twenty percent of the demand can be relaxed in appropriate cases; Takes note of Office Memorandum dt. 29th February, 2016 and observes that where addition on the same issue has been deleted by the appellate authorities in earlier years or where the decision of the SC or jurisdictional HC is in favour of the assessee, stay at lower deposit can be granted; Relies on SC ruling in LG Electronics India [TS-5393-SC-2018-O], observes that neither the AO nor the CIT have considered three basic principles i.e. the prima facie case, balance of convenience and irreparable injury while deciding the stay applications’. HC sets aside the order and notice and remands back the stay application to CIT for fresh adjudication; HC further clarifies that till the stay application filed by the petitioner is not decided, no coercive action shall be taken by the respondents in pursuance to the demand arising out of the order dated 08th December, 2021……… Click here to read and download HC Judgment
5) HC: Modifies appellate order over unserved notices to creditors for taxability under Sec.41(1) & 68 - Karnataka HC modifies appellate order on Assessee’s review petition, directs Revenue to examine the 12 cases where the notices returned unserved and whether there was cessation of liability of debt payable by the Assessee in light of the coordinate bench ruling in Alvares and Thomas; Further directs that on such verification, the tax liability of the Assessee can be determined applying the provisions of Section 41(1) and Section 68 after providing an opportunity to examine/cross-examine the creditors on this aspect with respect to 12 creditors where the notices were returned unserved……….Click here to read and download HC Judgment
6) ITAT: Not capital gains where land used for agricultural activities despite conversion into non-agricultural land - ITAT holds Assessee not liable to capital gains since subject property was converted into non-agricultural land yet the Assessee continued agricultural operations on the converted land and there was no evidence before the Revenue regarding non-agricultural activities; ITAT observes that the Assessee filed copies of RTC which were obtained much after the date of sale of the land which shows that the crops Ragi and Paddy were cultivated on the subject land; Holds that it is not possible to hold that the land was non-agricultural land liable for capital gains tax; Remarks that the Revenue unilaterally decided that the land was not subject matter of agricultural operations without any basis; Follows coordinate bench ruling in Shri M.R. Anandaram (HUF); Also follows Madras HC ruling in Ashok Kumar Rathi where it was held that if the land is recorded as agricultural land in the revenue records, it would only enure in favour of the assessee as agricultural land and assessee is entitled to get exemption from tax……Click here to read and download ITAT Order
Editorial Note: SC in [TS-5049-SC-1993-O] had laid out 13 indicators/questions which would help to determine the character of land.
Bombay HC in [TS-5250-HC-2017(Bombay)-O] held that local land laws relevant for characterization as agricultural land, rejects un-cultivable land plea. In the case of [TS-5661-HC-2010(Bombay)-O] HC held the assessee was not liable to capital gains when land was shown by the Govt. as agricultural land and that land was never used as non-agricultural land till it was sold;
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“Taxsutra Database”, a true Income-tax research tool, is an archive of over 116560+ 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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