Issue No. 249 / November 1^st, 2021

Dear Professionals,   

We are glad to present to you the 249^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

Status of Journals Updated

***********************

Expert Column

The Taxation Laws in India are litigation prone, and even though Indian Judiciary is internationally recognised for its detailed and unbiased verdicts on controversial issues, it lags behind when it comes to the time involved in closing an assessment.

CA Sachin Kumar BP (Chief Strategic Partner, Manohar Chowdhry & Associates) and CA Urvi Asher in this article highlights the issue of lack of consistency in tax litigation and suggest ways to step in the direction of adopting a consistent approach. The authors refer to certain recent judicial precedents and state that for the principle of consistency to apply, it is the taxpayers’ responsibility to ensure there is no change in the fact pattern.

They further touch upon recent amendments in reassessment proceedings and opine that “need for consistency in assessment orders from year to year may also draw support from judicial precedents where reassessment proceedings have been quashed on a mere ‘change of opinion’ or without having ‘reasons to believe”. They aver that there are numerous benefits of adopting a consistent approach in tax litigation and suggest some ways in which the consistent approach can be maintained.

Click here to read an article titled, “Tax Litigation – Need for Consistency”

----------------------------------------------------------------------------------------------

Recently, the SC hearing a batch of appeals filed before it, held that for chargeability of interest u/s 234B prior to FY 2013-14, the amount of income-tax deductible or collectible at source can be reduced while computing the advance tax liability.

Ashwath Pai and Sudeep Das (Chartered Accountant) in their article discuss the implications of the SC ruling and highlight that in the light of amended provisions of Section 209, the ruling is a relief to many, and will settle a long battle fought between the taxpayers and the Revenue. They briefly capture the arguments advanced by the Revenue and the Taxpayers and the various judicial precedents relied thereon. Apart from granting relief to taxpayers presently litigating the issue at lower levels, another interesting takeaway from the ruling is the principle reiterated by the SC that while interpreting any provisions of the Income-tax Act, subsequent legislations/ amendments to the provisions can be considered, in case the earlier provisions were ambiguous or led to multiple interpretations.

Click here to read an article titled, “Interest u/s 234B - Mitsubishi Corporation Ruling – Way Forward”

***********************

Key Takeaways from Handpicked Rulings

1) HC: Dismisses writ petition against faceless assessment order, regards statutory form over writ remedy - HC dismisses Assessee's writ petition against the faceless assessment order, on the grounds that the statutory remedy of appeal against the assessment order was available with the Assessee; Assessee before the HC submitted that proper opportunity of hearing has not been provided by the assessing authority prior to passing the assessment order; HC refers to coordinate bench rulings and holds that “when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation.” .................Click here to read and download HC Order 

2) HC: Citing alternative efficacious remedy, dismisses Assessee's writ petition against faceless assessment order - HC dismisses writ petition against the faceless assessment order passed without granting personal hearing; Notes that assessee had already approached the Appellate Authority against the assessment order and issuance of demand notice by way of filing an appeal u/s 246(A) of the Act; The Appellate Authority has powers to set aside the assessment order if found to be contrary to mandatory provisions under the Act and u/s 251 and that the Appellate Authority is having all the powers to consider the grounds raised by the petitioner in appeal; HC relies on SC ruling in case of Satya Pal Anand wherein exception to the rule of alternative remedy has been recognized..........Click here to read and download HC Order 

3) HC: Quashes Faceless Assessment order passed contrary to the procedure in Section 144B - HC: Quashes faceless assessment order passed along with notice of demand as well as show-cause notice issued u/s 274 r.w.s 271AAC(1). HC allows assessee’s writ petition and directs revenue to issue a draft Assessment Order to the Assessee and give an opportunity to file its objections along with documentary evidence and thereafter pass such order as it deems fit by also giving a personal hearing as per rules; Accepts Assessee’s statement to withdraw the Appeal filed before appellate authorities against the Assessment Order which had been filed to save the Appeal from getting time-barred, within 2 weeks from today; Notes that revenue does not say why the request of Petitioner to issue summons to the third-party lenders could not be issued or will not be issued and straight away goes ahead and passes the Assessment order making addition u/s 68 with regard to a party who was not even referred to in any of the show-cause notices..............Click here to read and download HC Order 

4) ITAT: Western Union has no Fixed Place PE or DAPE in India under India-USA DTAA - Delhi ITAT dismisses Revenue’s appeal by following ITAT’s conclusions for AY 2001-02 which have thereafter been followed in AYs 2002-03, 2003-04, 2004-05, 2005-06, 2007-08, 2008-09, 2009-10 and 2010- 11, holding that Assessee did not constitute any Permanent Establishment (PE) in India; Assessee, a non-resident company, registered in USA and engaged in the business of rendering money transfer services including transfer of money across international borders; Revenue contended that the Assessee company has a Fixed Place PE in India under Article 5 of India-US DTAA due to usage of software developed and owned by the Assessee in India; Further Revenue claimed existence of Agency PE on account of agents working in India; ITAT considers the orders passed in earlier years for AYs 2001-02 to 2010-11 wherein it was concluded that though the Assessee had a business connection in India, it neither had fixed placed PE nor agency PE in India and in absence of any PE in India the profits, if any, attributable to India operations could not be assessed as business profits under Article 7 of the India-US DTAA; It was also held that Assessee were independent agents under Article-5(4) of the India US-DTAA; Therefore, being the facts similar to that of earlier years, ITAT views that a consistent view taken by the ITAT should not be disturbed and hence, dismissed Revenue’s grounds............Click here to read and download ITAT Order 

5) HC: Quashes reassessment, directs Revenue to pass speaking order on Assessee’s objections within two weeks - HC quashes reassessment order and order rejecting objections, directs Revenue to pass a speaking order rejecting options within two weeks; Assessee-Company was issued a notice u/s 148 for AY 2013-14 and objections filed by the Assessee were rejected by the Revenue after a year of filing the same, and Assessee preferred a writ petition against the impugned notice and the order passed rejecting the objections; Assessee submitted that there being no independent application of mind by the Revenue, the reasons recorded suffered a serious statutory illegality; Assessee also contended that information received from ADIT, Kolkata that it is a beneficiary for an amount of Rs. 1 Cr. was baseless since the amount received was in the nature of loan, and the transaction being genuine there could not be any addition of any income; Assessee relied on the SC ruling in GKN Driveshafts and submitted that the order rejecting the objections was not a speaking order; HC finds that in the instant case there was no order u/s 143(3) and return of income was processed u/s 143 and..........Click here to read and download HC Judgment 

6) HC: Higher depreciation allowable for vehicle used for running on hire for own business - HC holds that the Assessee is entitled for higher rate of depreciation @ 30% for AY 2006-07 in respect of motor buses/lorries/taxi used in the Assessee's business of running them on hire; Follows SC ruling Radhasoami Satsang and identical issue decided by the ITAT in Assessee’s own case for AYs 1993-94 and 1995-96; Assessee, being a C & F agent involved in stevedoring, clearing and forwarding agency, custom house agency, steamer agency, rendering services in New Mangalore Port, was assessed at Rs. 87.66 lacs against Rs. 17.60 lacs pursuant to a search conducted on its premises u/s 132; Pr. CIT, exercising its power u/s 263, directed Revenue to pass a fresh assessment order regarding depreciation @30% on lorries, tippers, loaders, etc. which was negatived by the Revenue and appealed against before CIT(A) and allowed in Assessee’s favour; ITAT also decided in favour of the Assessee following coordinate bench’s ruling in Assessee’s own case for prior years; On Revenue’s appeal, HC refers to SC ruling Radhasoami Satsang wherein it was held “even though principles of res judicata do not apply to income tax proceedings, but where a fundamental aspect permeating through the different Assessment Years has been found as the fact one way or the other and the parties have allowed the position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in subsequent year”; Upholds the findings of CIT(A) and the ITAT by following earlier year’s judgment and rules in favour of Assessee............Click here to read and download HC Judgment 

7) HC: Holds Assessee eligible under VsV where of filing of appeal before HC not expired on Jan 31, 2020 - HC sets aside the rejection of declaration under Direct Tax Vivad se Vishwas Act; Holds that u/s 260A, time for filing any appeal was still alive on Jan 30, 2020; Revenue had made additions to Petitioner’s income by assessment order dt. Mar 25, 2010 and an appeal was preferred before the CIT(A) which partly allowed Petitioner’s appeal leading to an appeal with the ITAT, again partly allowed on Oct 22, 2019; However, Petitioner submitted that the ITAT’s order copy was not served upon it for eleven months as a result of which communication was made to the Assistant Registrar of the ITAT and eventually received the order copy in the month of Dec 2020; Assessee submitted that the time limit of 120 days was further extended as per SC order by 90 more days from March 15, 2021 owing to the situation of COVID-19 and thus filed an appeal on Oct 30, 2020 even before receiving the certified copy of ITAT order and the declaration under VsV on Mar 17, 2021; Revenue challenged that the declaration should have been filed before January 31, 2020; HC analyses section 2 of the VsV Act and on observing the chronology of various events, remarks that the period of limitation would start running from the date of receipt of certified copy as per Section 260(A)(2)(a) and a period of..........Click here to read and download HC Judgment 

***********************

Lot's more at Taxsutra Database

Access all “Taxsutra Database Newsletters”, in case you have missed any!

Access latest News....and more!

----------------------------------------------------------------------------------------------

About Taxsutra Database!

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 114350+ 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.

Click Here to Sign up, make payment and join the Taxsutra Family.  

Copyright © TAXSUTRA. All Rights Reserved

Issue No. 248 / October 8^th, 2021

Dear Professionals,   

We are glad to present to you the 248^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

Status of Journals Updated

***********************

Key Takeaways from Handpicked Rulings

1) HC observes Manish D. Jain (HUF) ruling has attained finality, follows it and allows Revenue’s appeal - HC allows Revenue’s appeal raising the substantial question of law over validity of remission of matter by ITAT to AO and shifting of onus on the AO to bring on record the role of the assessee in promoting the company and the relation of the assessee with the promoters and role ofinflating stock prices already been done by the AO and the SEBI; HC holds that that the issue covered by its earlier ruling in Manish D. Jain (HUF) in favour of the Revenue which has attained finality as no appeal has been preferred by the assessee therein or any other assessee whose case was decided similarly……………….Click here to read and download HC Judgment

2) HC: Invoking Sec. 159, holds notice u/s 133(6) served upon assessee, binding on legal heir - HC holds that proceedings can be continued against the legal representatives only when the notice has been issued in the name of the person, who is dead and that if the notice is issued to the assessee after his death, the proceedings could not be continued against the legal representatives; Dismisses writ petition against the notice u/s 133(6) issued to father of the Petitioner when the father was alive and thus, holds notice to be valid as proceedings could be continued and taken forward against the legal representatives under the provisions of Section 159; Further remarks that fresh notice will have to be issued to the legal representatives for this purpose and if there are more legal representatives apart from the Petitioner, then, the Petitioner would be at liberty to inform their names and addresses to the Revenue for bringing them on record as per the law. ……………….Click here to read and download HC Judgment

3) HC directs furnishing of AO’s report to Assessee for effective hearing on waiver of interest u/s 220(2A) - HC allows Assessee’s appeal against dismissal of writ petition against order rejecting the application for reduction or waiver of interest u/s 220(2A) decided by calling for a report from the jurisdictional AO which was not served upon the assessee;HC holds that the report of AO would constitute the basis for recording the reasons u/s 220(2A) or for rejecting the applications, thus, directs that for affording an opportunity of being heard, a copy of Assessing Officer's report is also made available to the assessee. Upon such copy being made available to the assessee, the effectiveness with which the assessee would have presented a case before the CIT would be different from presenting the case without a copy of the report submitted by the Assessing Officer or appreciating the circumstances stated against the assessee..……………….Click here to read and download HC Judgment

4) HC upholds additions u/s 68 against liquor company w.r.t. share application money - HC upholds additions to Assessee’s income u/s 68 for AY 2003-04 for not being able to substantiate the genuineness of receipt of share application money; Assessee, a private limited company engaged in the business of manufacture of Indian Made Foreign Liquor, was assessed pursuant to a search operation; Revenue denied the claims of Assessee that it had filed the necessary documents with the Registrar of Companies and furnished all the details with the Revenue; Held that that merely filing the identity of the shareholders or the share applicants and the mode of receipt of amounts would not amount to discharging the onus cast upon the Assessee; Revenue had also summoned company's directors, the promoter-director, the former managing director and the vice president, u/s 131 and observed from their statements that there was no transparency in the control and administration and ownership of the company and noted that the share capital was introduced in the company through ……………….Click here to read and download HC Judgment

5) ITAT: Deduction u/s 10B cannot be withdrawn for subsequent years if there is no change in facts and circumstances of the case. Assessee-Individual, engaged in export of Information Technology Enabled Services from a Software Technology Park and was disallowed the claim of deduction u/s 10B for the AY 2009-10; ITAT notes that the assessee was allowed deduction u/s 10B on the same activity for assessment year 2003-04 to 2008-09. Even in assessment year subsequent to the present assessment year i.e. AY 2010-11 also, the assessee has been allowed the deduction u/s 10B. In such circumstances, ITAT holds that there was no reason to justify disallowing the deduction only in the year under consideration by the AO, follows SC ruling in Excel Industries on rule of consistency…………Click here to read and download ITAT Order

6) HC : Permits assessees to file applications before Interim Board of Settlement; Considers plea that date of search is ‘critical’ - In a writ petition challenging the abolition of the Settlement Commission, HC permits assessees to carry their applications before the Interim Board of Settlement as per CBDT Press Release and CBDT Order dt. Sep 28, 2021 that permits applications to be filed by Sep 30, 2021;  Considers assessee’s submission that the date that is critical is the date when the search took place and not the date of issuance of notice, particularly since the applications preferred by other persons who were simultaneously searched were taken on record by the Settlement Commission ; Clarifies that this order only permits the applications to be filed and maintainability of the applications and the merits of the individual cases will be completely open to the Interim Board to pass appropriate orders……………Click here to read and download HC Order

***********************

Expert Column

Misinformation about public policies spreads like wildfire on messaging applications and these days the widely used messaging platform of WhatsApp has become one of the mediums to spread fake news. On similar lines, since the past few days two WhatsApp messages regarding applicability of section 139A(5)(c) with effect from October 01, 2021 are being circulated around.

In this article, authors CA Dindayal Dhandaria and CA Naveen Kumar Dhandaria, conduct a reality check on these messages to bring out the actual truth behind it. Explains section 139A(5)(c) r.w.r 114B that it provides “all the sellers raising an invoice of Rs 2,00,000 or more should mention the 10-digit PAN number of vendor & customer on each such invoice wef 01.10.2021 onwards along with verification of such PAN as per Rule 114C.” Giving a brief background about the Rules 114B and 114C and the relevant provision of section 139A(5)(c), elucidates the provision with an illustration that how a person needs to quote his PAN in the capacity of a purchaser and a seller. Explains that the Rules 114B and 114C were inserted in the year 1998 and were amended several times upto the year 2015 and similarly no changes were made in section 139A(5)(c) as well, after January 01, 2016. States that section 139A(6) was inserted by Finance (No.2) Act, 2019 with further amendments w.e.f. 1.9.2019 by inserting sub-sections (6A) and (6B), which however, do not impact the requirement of quoting PAN as laid down in section 139(5)(c). Thus, the authors conclude “…requirement to quote PAN of both the vendor and the purchaser in the prescribed documents is prevailing since 1-1-2016 and not since 1-10-2021 as is being circulated through recent WhatsApp messages.”

Click here to read an article titled, “Whatsapp Messages stating that section 139A(5)(c) is applicable since 01-10-2021 - How Far Correct?”

***********************

Lot's more at Taxsutra Database 

Access all “Taxsutra Database Newsletters”, in case you have missed any!

Access latest News....and more!

----------------------------------------------------------------------------------------------

About Taxsutra Database!

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 114010+ 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.

Click Here to Sign up, make payment and join the Taxsutra Family. 

Copyright © TAXSUTRA. All Rights Reserved

Issue No. 247 / September 23^rd, 2021

Dear Professionals,   

We are glad to present to you the 247^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

Status of Journals Updated

***********************

Key Takeaways from Handpicked Rulings

1) HC: Co-op society offering credit facilities to members, not co-op banks, eligible for deduction u/s 80P - Assessees-Deendayal Nagar Sahakari Pathsaunstha Maryadit and The Shiroda Urban Cooperative Credit Society Ltd. are registered Co-operative Societies, governed by the Goa Co-operative Societies, formed with the object of accepting deposits and provide credit facilities; In the course of assessment proceedings Revenue held the Assessees would be co-operative banks within the meaning of Part V of the Banking Regulation Act and disallowed the deduction u/s 80P(2); Revenue further held the activity of the society to be akin to banking and their members were from public and transactions took place post membership, and that there was no express prohibition on induction of a co-operative society as a member; HC observes that Assessees have their paid up share capital and reserves in excess of Rs. 1 lakh, and thus satisfied one of the conditions under Part V of the Banking Regulation Act; Further remarks that Revenue was at loss to show as to how there is prohibition to induct a cooperative society; With regards to business of accepting deposits and lending money, HC remarked that no specific material was placed on record showing that Assessees were offering credit facilities to non-members ……………..Click here to read and download HC judgment

2) HC: Rental income from leasing plant & machinery deductible u/s 80HHC - Assessee-Company, engaged in manufacture and sale-export of Calcined Petroleum Coke (CPC), was disallowed deduction u/s 80HHC by the Revenue pursuant to the directions issued by the CIT u/s 263 holding that product exported by Assessee was mineral oil; AO in giving effect to the aforesaid order, partially allowed Assessee’s claim for deduction u/s 80HHC which was challenged before the CIT(A) who remanded the matter for re-computation of deduction u/s 80HHC; Assessee preferred an appeal before the ITAT which dismissed the appeals against which order Assessee preferred before the HC;Observes that Assessee engaged in manufacture of CPC purchased plant and machinery which was given on lease and Assessee derived rental income……………..Click here to read and download HC judgment

3) HC: Interest on interest-free loan not taxable, when advanced to subsidiary for commercial expediency - Bombay HC dismisses Revenue’s appeal, rules against taxability of interest income for interest-free loans advanced to subsidiary entities;Assessee-Company was a holding company with deep interest in its subsidiary, advanced interest-free loans of Rs. 132.31 Cr. to the subsidiary entity and was called upon to explain why such interest income should not be taxed in its hands; Revenue made an addition of Rs. 15.37 Cr, disregarding the explanation provided by the Assessee, which was deleted by the CIT(A) and ITAT on appeal; HC observes both the CIT(A) and ITAT have recorded findings of fact that loans advanced to subsidiaries were not sham transactions and were advanced for reasons of commercial expediency; HC finds from the material on record that the company has reserves of over Rs.1000 Cr. and even the subsidiaries did not derive any interest income from the interest free advances received from the Assessee……………..Click here to read and download HC judgment

4) ITAT: Quashes revision; Assessment based on adequate enquiries, original documents - ITAT allows Assessee’s appeal, holds proceedings u/s 263 to be not erroneous where the AO passed the order pursuant to sufficient enquires; A search operation was conducted at the premises of one M/s Godwin Group, during the course of which, certain documents related to Assessee-Individual were found; Based on the information and after recording the satisfaction note, Assessee’s case was subjected to assessment u/s 153C; The evidence obtained pertained to an agreement to sell a particular property for a consideration of Rs.11.25 Cr.; Assessee submitted that the agreement was executed by a Amarjit Randhwa acting for himself and a co-owner, and that the Assessee had not appointed this person as a GPA, and accordingly the agreement to sell cannot be used against Assessee; Revenue after making adequate enquiry accepted Assessee’s submission and held that entire amount was liable to be assessed in the case of Amarjit Randhwa in his individual capacity; Subsequently Pr.CIT initiated proceedings u/s 263 holding the assessment as erroneous and made without adequate enquiry; ITAT finds that “once the order passed by the CIT Appeal in the hands of the ……………..Click here to read and download ITAT Order

5) HC: Seizure of jewellery held as stock-in-trade, illegal; Awards Rs.1 Lac as interest - HC allows assessee-jeweller’s writ petition, directs Revenue to “forthwith return to the Petitioner, the jewellery seized” and directs revenue to pay interest of a sum of Rs.1 lakh as a gross amount towards retention of assessee's is stock-in-trade; Declares all the actions taken pursuant to search, as illegal and contrary to the provision of Section 132(1)(iii); Holds that ..”the seizure has to be conducted after due care and caution”; The the Investigation Wing was in possession of credible information that Petitioner was in possession of jewellery which represents his undisclosed income or property; Further notes that before seizure is conducted explanation ought to be taken from the concerned firms and if they are able to produce the related books of account and necessary proof of articles which may include sale details, purchase details, stock register, audit reports, income tax returns etc., the Income Tax Authorities ought to take a decision at this stage and ought not to be allowed to seize the goods for years together to await for the assessment order to be passed in relation to concerned employee; The claim of the goods in terms of Section 132(1)(iii) was made by the assessee as the jewellery seized was stock-in-trade and required material was already placed before the Income Tax Authorities; Thus, holds the seizure to be unjustified and illegal……………..Click here to read and download HC judgment

***********************

Expert Column

The recent ruling by the Mumbai bench of ITAT in case of Pramod Lele , held that the expression ‘Management consultancy’ could not be brought within the ambit of ‘Technical consultancy’ and it is still a debatable issue whether it constitutes a business receipt or a professional receipt. The bench ruled out that classifying the management consultancy receipt as business or profession, constitutes a ‘reasonable cause’ u/s 273B and thus, penalty levied u/s 271B for not getting the accounts audited as required u/s 44AB, is deleted.

Author, CA A. Sekar, analyses the judgment and elucidates the observations made by the ITAT in this article. Distinguishes between the terms ‘business’ as per Sec. 2(13) and ‘profession’ as per Sec. 2(36) and remarks “All professions are businesses, but not all businesses are not  professions”. He agrees with ITAT on the fundamental feature that to constitute a profession, some advanced skills are needed to be acquired by advanced education and special training. However, points out that no attention was drawn to Explanation (2) u/s 9(vii) according to which the definition found in bilateral treaties, the fees for ‘technical services’ includes consideration received for rendering any managerial, technical or consultancy services, thus, the author raises a question that whether inclusion of the term consultancy under one umbrella of Sec. 9(vii) is sufficient to conclude that the word ‘technical consultancy’ used in Sec. 44AA would also cover all the stated services.

Click here to read an article titled, “Business vs Profession receipts - Is it debatable?”

***********************

Lot's more at Taxsutra Database 

Access all “Taxsutra Database Newsletters”, in case you have missed any!

Access latest News....and more!

----------------------------------------------------------------------------------------------

About Taxsutra Database!

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 113735+ 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.

Click Here to Sign up, make payment and join the Taxsutra Family. 

Copyright © TAXSUTRA. All Rights Reserved

Issue No. 246 / September 8th, 2021

Dear Professionals,   

We are glad to present to you the 246^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

Status of Journals Updated

***********************

Expert Column

The term computer is not defined under the Income tax Act, however, under Information Technology Act, the function of composing and sending an email and receiving a reply qualifies as a computer. The Amritsar bench of ITAT in a recent ruling held that iPads are communicating devices and thus, not a substitute for computers, which had sparked a debate among tax professionals warranting a discussion.

In this backdrop, the author CA K Prasanna (Associate Partner, M2K Advisors LLP), this article analyses the issue and rationale of the judgement wherein ITAT applied the dominant purpose test on iPads based on the SB ruling (supra) observation and concluded that the dominant purpose is only a communicating device. The author remarks “There is apprehension about whether the dominance test must be evaluated from the taxpayer's perspective or through common parlance”. Further, on ITAT’s conclusion being based on the fact that Apple store selling iPad as an entertainment device and the fact that iPad has an IMEI number, the author views “…purpose by which the supplier market the product cannot be the determinative factor of dominant use…even if the iPad has an IMEI number, it cannot automatically become a communicating device, and it cannot displace the requirement of mobiles in our day-to-day life”. The author concludes by saying “…the gadgets are developed with multi-functional features, are pocket-friendly, and can be adapted to the consumer's requirements. Hence there is a need to interpret the law in light of the circumstances surrounding it”.

Click here to read the article titled “Is iPad a Computer entitled to a higher depreciation rate?”

----------------------------------------------------------------------------------------------

The Black Money Act, enacted in 2015 has led to detection of several instances of undisclosed foreign income and  helped the government raise a tax demand of Rs. 8216 Cr by unearthing numerous violations. 

Mr. Ruchesh Sinha (Advocate) along with Mr. R.K. Aggarwal and Mr. Pawan Aggarwal (Chartered Accountants) in their article explain that the term black money refers to undisclosed funds and monies on which taxes have not been paid in the light of a writ petition filed by Late. Ram Jethmalani in July 2011 which, according to them, was the trigger for introducing the law.

Considering the history, language and characteristics of the Black Money Act, and the practical scenario, they highlight certain issues that require consideration including definition of the expression ‘in which it comes to the notice of the Assessing Officer’, non-prescription of time limit to find out information about existence of assets etc. They also state that absence of the provisions for compounding and the amendment made in the PMLA Act for certain offences under the Black Money Act appears to be stringent and draconian in nature.

They conclude stating that punishment under the Black Money Act should be proportionate with the crime and also that there should be appropriate filters placed at the selection stage, to pick a case for investigation purpose, let alone the assessment, penalty and prosecution.

Click here to read the article titled “The Black Money Act – A Genesis”

***********************

Key Takeaways from Handpicked Rulings

1) HC: Upholds CBDT’s notification extending time to issue Sec. 148 notice after March 31st, 2021 - HC dismisses assessee's writ petition against reassessment notice issued under the old regime and holds that by extension notification issued by CBDT and reaffirms its view on conditional legislation; Assessees-Individuals submits that ROI was filed for the AYs 2013-14 and on the basis of some information available initially a scrutiny was done however no concealment was found and again a notice u/s 148 has been issued on 30.06.2021, the power to issue the notice was preceded with a new provision of law and thereby Section 148 is to read with Section 148-A of the IT Act, 1961. HC refers to................Click here to read and download HC Judgment

2) ITAT: Upholds CIT revision over taxability of interest income on deposits with co-operative banks – ITAT dismisses assessee's (a co-operative society) appeal, holds that CIT was justified in exercising his powers of revision u/s.263 and directing the AO to tax interest income received  on deposits with co-operative banks; Holds that such income is neither of the nature specified in Sec.80P(2)(a)(i) nor 80P(2)(d) of the Act; Notes that CIT in his SCN referred to the decision of the Totagars Co-operative Sale Society [TS-5548-HC-2017(Karnataka)-O] for the proposition that the assessee was not entitled to deduction u/s 80P(2)(d) of the Act on the interest earned from deposits with co-operative banks and also in the light of the principles enunciated by the SC in Totgars Co-operative Sale Society [TS-5012-SC-2010-O], that in case of a society engaged in providing credit facilities to its members, income from investments made in banks does not fall within any of the categories mentioned in section 80P(2)(a) of the Act.......................Click here to read and download ITAT Order

3) ITAT: Holds conversion of agricultural land into residential stock-in-trade, is business -  Splits the profit on sale of plots developed on agricultural land into business income & capital gains; States that conversion of agricultural land into residential stock in trade of business of selling the plots of land is for earning profit; Holds that the fair market value (FMV) of the asset on the date of conversion as reduced by the cost of acquisition is required to be assessed under the head “capital gain” in the year(s) the stock-in-trade is sold or transferred; Further, observes that sales realization of the stock-in-trade over such fair market value is required to be assessed as “business income”; Accordingly, holds that taxability arising on conversion agricultural land into .......................Click here to read and download ITAT Order

***********************

Lot's more at Taxsutra Database 

CBDT notifies Rule 9D for calculation of taxable interest on PF contributions; Prescribes monetary thresholds

CBDT issues Circular on extension of various e-filing deadlines

CBDT notifies extended timelines under Direct Tax Vivad se Vishwas Act, 2020 (3 of 2020)

Access all “Taxsutra Database Newsletters”, in case you have missed any!

Access latest News....and more! 

----------------------------------------------------------------------------------------------

About Taxsutra Database!

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 113545+ 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.

Click Here to Sign up, make payment and join the Taxsutra Family. 

Copyright © TAXSUTRA. All Rights Reserved

ssue No. 245 / September 2^nd, 2021

Dear Professionals, 

 We are glad to present to you the 245^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

Status of Journals Updated

***********************

Expert Column

The recent judgment by the Hon'ble Supreme Court in M.M. Aqua, which was also the last judgment by the legendary Justice R.F. Nariman, brings us to delve deeper into the legal position on declaratory statutes. The retrospective applicability of declaratory statutes, typically inserted as an Explanation with the words "for the removal of doubts", enjoys a rather notorious status in the tax framework. Such statutory amendments have often been used to alter the settled legal position and saddle the taxpayers with an unanticipated liability. 

Mr. A. Sekar (Chartered Accountant) traces India's experience with the declaratory statutes in the light of plethora of judgments delivered across the board. He discusses the time-tested case laws with divergent views to demonstrate the expanse and the impact of the quintet - for the removal of doubts. He lays emphasis on the legal position that declaratory statutes meant only to explain the pre-existing legal provision cannot be retrospective in its effect.

Mr. Sekar is of the view that the draftsmen need to go beyond the words "for the removal of doubts", to bring an end to the controversy inexorably arresting the judicial minds due to its repetitive usage in the legislations and mostly leading to the conclusion that favours the taxpayers.

Click here to the article titled "Removing Doubts on Amendments Meant - For The Removal of Doubts"

***********************

Key Takeaways from Handpicked Rulings

1) ITAT: Upholds disallowance on export commission paid for TDS default - ITAT upholds CIT(A)’s order restricting disallowance on exports, further allows deduction of interest on advance paid from interest free funds; Assessee filed its return of income declaring nil income for AY 2015-16 and his case was picked up for scrutiny assessment; Revenue disallowed commission on exports of Rs. 23.84 lakhs on the ground that no tax deduction was made on the same; Revenue further held that Assessee had failed to substantiate the rendering of services by commission agents with supporting evidences; On appeal, CIT(A) restricted the disallowance to Rs.5.42 lakhs; ITAT observes CIT(A) sustained the disallowance on Assessee’s failure to submit supporting detail to substantiate the payment; Follows co-ordinate bench ruling in Assessee’s own case for earlier year and dismisses appeal; Assessee made certain advances for intangible assets but did not receive the same during the year; Revenue held that Assessee did not provide .............. Click here to read and download ITAT order

2) ITAT: Expenditure on development of designs and tools, capital in nature - ITAT holds expenditure of Rs. 3.75 Cr incurred on development of tools and designs to be capital in nature; Assessee-Company engaged in the manufacture of automotive switch gears claimed Rs. 3.75 Cr incurred on development of tools and designs used for Assessee’s business as revenue expenditure which was claimed as a deduction; Assessee had written off such expenditure over a tenure of 10 years in accounts; Revenue disallowed the expenditure holding it to be capital in nature, which order was reversed by the CIT(A); ITAT reverses the CIT(A)’s order and remarks that the CIT(A)without examining the true nature of expenditure and the judicial precedents has allowed Assessee’s claim; Allows Revenue’s appeal and restores the addition.............. Click here to read and download ITAT order

3) ITAT: Non-issuance of notice u/s 143(2) on change of jurisdiction renders assessment null and void - ITAT allows Assessee’s appeal on jurisdictional ground whereby notice of assessment was issued by one ITO, whereas assessment orders were passed by non-jurisdictional Assessing Officer; Assessee-Individual filing returns with ITO Ward-3(1) submitted application for change of address with the PAN services unit which was confirmed and  the new address was within Ward-3(1); Notice u/s 143(2) was issued by ITO-1(1), whereas the order was passed by ITO, Ward 3(5) who was non jurisdictional Assessing Officer; Assessee relied on the Allahabad HC ruling in Mohd. Rizwan and submitted that since assessment order has been passed by AO who has not given notice u/s 143(2); the order  is null and void; Revenue submitted during issuance of notice u/s 143(2), Assessee’s PAN was with ITO-1(1) and not ITO 3(5), which was subsequently transferred; Further the assessment order passed by ITO Ward 3(5) is in continuation of notice issued by AO, Ward 1(1); ITAT finds Form 26AS issued by the Revenue u/s 143(2) should have been issued by the AO having jurisdiction over the Assessee which has not been done, and orders should be passed by the same AO who issued notice u/s 143(2).............. Click here to read and download ITAT order

4) ITAT: Restricts disallowance u/s 14A on availability of non-interest-bearing funds – Ahmedabad  ITAT restricts Revenue’s disallowance u/s 14A on availability of non-interest-bearing funds with the Assessee;Assessee-Company filed its return of income declaring total income at Rs. 12.28 Cr and claimed exemption of Rs. 1.26 Cr as dividend in computation of income, disallowing Rs. 4.75 lakhs being the only disallowance u/s 14A since non-interest-bearing funds were available with Assessee; Revenue held that no reason was furnished for non-allocation of common management expenses, and thus determined the disallowance u/s 14A at Rs.46.54 lakhs, which was confirmed by CIT(A); ITAT follows its co-ordinate bench ruling and restricts the disallowance to Rs. 14 lakhs as against Rs. 46.54 lakhs disallowed by Revenue; In computation of deduction u/s 80-IC, Revenue found financial expenses pertaining to domestic sales were not allocated to eligible unit u/s 80-IC, and on the basis of allocation rate of 58.69% reduced Rs. 27.89 lakhs from deduction claimed by Assessee u/s 80-IC, which was confirmed by the CIT(A); ITAT observes Assessee did not .............. Click here to read and download ITAT order

5) ITAT: Amendment to Sec. 40(a)(ia) clarificatory, restricts to 30% disallowance - Ahmedabad ITAT upholds CIT(A)’s order restricting disallowance u/s 40(a)(ia) to 30% of total expenditure towards interest payment for AY 2012-13; Holds the amendment to section 40(a)(ia) brought in by Finance Act, 2014 is clarificatory in nature and thus, applicable retrospectively; Assessee had filed a loss return and was issued notice u/s 263 by Pr. CIT for disallowing payment of interest to various parties without complying with TDS provisions; Revenue, on noting that the interest of Rs. 74.54 lacs have been debited to P&L A/C on which Assessee was liable to deduct tax u/s 194A, rejected Assessee’s submission of being under bonafide belief that the recipients of interest were not subject to TDS provisions; Further, Revenue rejected Assessee‘s explanation that the recipients were all operating as banking companies whose accounts are audited and returns are filed and respective taxes have been duly deposited; Thus, disallowed entire interest payment of Rs. 74.54 lacs holding the amendment to section 40(a)(ia) to be prospectively applicable from April 01, 2015 onwards; ITAT refers to Allahabad ITAT bench ruling in M.K. Agrawal & Co. wherein it was held “…once the recipient of the interest amount has included the same as part of their income and filed the return of income in that case the provision of section 40(a)(ia) is not required to invoked”; Observes that the Assessee failed to substantiate its submission of taxes .............. Click here to read and download ITAT order

***********************

Lot's more at Taxsutra Database 

CBDT notifies Rule 9D for calculation of taxable interest on PF contributions; Prescribes monetary thresholds

CBDT issues Circular on extension of various e-filing deadlines

CBDT notifies extended timelines under Direct Tax Vivad se Vishwas Act, 2020 (3 of 2020)

Access all “Taxsutra Database Newsletters”, in case you have missed any!

Access latest News....and more! 

----------------------------------------------------------------------------------------------

About Taxsutra Database!

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 113435+ 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.

Click Here to Sign up, make payment and join the Taxsutra Family. 

Copyright © TAXSUTRA. All Rights Reserved