Comprehansive Analysis of Income Computation and Disclosure Standads

The binding effect of a decision of Supreme Court does not depend upon whether. a particular argument was considered therein or not, provided that the point with reference to which an argument was subsequently advanced was actually decided.

Smt. Somavanti v. State of Punjab [1963] 2 SCR 774 and T. Govindraja Mudaliar v. State of Tamil Nadu [1973] 3 SCR 222.

Taxability of Damages for breach of contract received by the buyer of Immovable property discussed by ITAT Amritsar

The law under section 51 and 56(2)(ix) provides for the taxability of forfeiture of advance money received in the hands of seller. Till AY 2014-15, the forfeited sum was deductible from the cost and even the excess of forfeited money over cost was capital receipt not taxable by virtue of Supreme Court Judgment in Travoncore Rubbers. In the hands of buyer the forfeiture of amount by reason of failure on the part of buyer was not treated as capital loss by virtue of Bombay High Court Judgement in Sterling Investment Corporation 123 ITR 441. However wef AY 2015-16, the forfeited amount is taxable in the hands of seller as Income from other Sources and no reduction from cost of the asset has to be made.

Delhi High Court judgment in the case of CIT vs. Zoom Communication (P) Ltd. 191 Taxman 179 (Del.). The Delhi High Court has held as under:- "It was held that so long as assessee has not concealed any material fact or any factual information given by him has not been found to be incorrect, he will not be liable to imposition of penalty u/s. 271(1)(c), even if claim made by him is unsustainable in law, provided that he either substantiate explanation offered by him or explanation, even if not substantiated, is found to be bona fide.

ITAT Ahmedabad, Bench-D in the case of Sun Petrochemicals Pvt. Ltd. Vs. ITO - ITA No. 1010/Ahd/2009 dated 05-06-2009 held that no interest can be charged when there is restrospective amendment in the Act. If no interest can be charged then the question of levy of penalty does not arise in view of restrospective amendment.

How to Write off a debt as per provisions of Section 36(1)(vii)

Held by Supreme Court in Southern Technologies Ltd. [320 ITR 577]

If an assessee debits an amount of doubtful debt to the profit and loss account and credits the asset account like sundry debtor’s account, it would constitute a write off of an actual debt.

 However, if an assessee debits `provision for doubtful debt' to the profit and loss account and makes a corresponding credit to the `current liabilities and provisions' on the liabilities side of the balance-sheet, then it would constitute a provision for doubtful debt. In the latter case, the assessee would not be entitled to deduction

Held by Supreme Court in Vijya Bank 323 ITR 168 

upholding the order of Tribunal and reversing the decision of High Court that besides debiting the Profit and Loss Account and creating a provision for bad and doubtful debt, the assessee-Bank had correspondingly/simultaneously obliterated the said provision from it's accounts by reducing the corresponding amount from Loans and Advances/debtors on the asset side of the Balance Sheet and, consequently, at the end of the year, the figure in the loans and advances or the debtors on the asset side of the Balance Sheet was shown as net of the provision “for impugned bad debt”.

In the circumstances, we hold, on the first question, that the assessee was entitled to the benefit of deduction under Section 36(1)(vii) of 1961 Act as there was an actual write off by the assessee in it's Books, as indicated above

Whether it is imperative for the assessee-Bank to close the individual account of each of it's debtors in it's books or a mere reduction in the Loans and Advances or Debtors on the asset side of it's Balance Sheet to the extent of the provision for bad debt would be sufficient to constitute a write off

SC in the case of Vijya Bank vs. CIT 323 ITR 168 has held that

What is being insisted upon by the Assessing Officer is that mere reduction of the amount of loans and advances or the debtors at the year-end would not suffice and, in the interest of transparency, it would be desirable for the assessee-Bank to close each and every individual account of loans and advances or debtors as a pre-condition for claiming deduction under Section 36(1)(vii) of 1961 Act……..because the Assessing Officer apprehended that the assessee-Bank might be taking the benefit of deduction under Section 36(1)(vii) of 1961 Act, twice over.

In this context, it may be noted that there is no finding of the Assessing Officer that the assessee had unauthorisedly claimed the benefit of deduction under Section 36(1)(vii), twice over. The Order of the Assessing Officer is based on an apprehension that, if the assessee fails to close each and every individual account of it's debtor, it may result in assessee claiming deduction twice over. In this case, we are concerned with the interpretation of Section 36(1)(vii) of 1961 Act. We cannot decide the matter on the basis of apprehensions/desirability. It is always open to the Assessing Officer to call for details of individual debtor's account if the Assessing Officer has reasonable grounds to believe that assessee has claimed deduction, twice over. In fact, that exercise has been undertaken in subsequent years.

There is also a flipside to the argument of the Department. Assessee has instituted recovery suits in Courts against it's debtors. If individual accounts are to be closed, then the Debtor/Defendant in each of those suits would rely upon the Bank statement and contend that no amount is due and payable in which event the suit would be dismissed.

Further Held by Supreme Court that if amount is recovered subsequently and it is more than difference between debt and amount so allowed , the balance can be taxed u/s 41(4).

TDS of the assessee is deducted u/s 194-I for providing accommodation on daily basis. However assessee's memorandum of association indicates that main object of the company is to carry on the business of hotels, resorts, boarding, lodges, guest houses, etc. However no property was let out and assessee received only rentals for occupation of the premises on a daily basis. Assessing Officer's contention that income has to be assessed under 'house property' because TDS is deducted u/s 194-I is not correct because Even if machinery was leased, the consequent rent comes under the definition of rent u/s 194-I. But machinery lease cannot be considered under 'income from house property'. That indicates that just because TDS was made under section 194-I, it cannot be treated as 'house property income' as the rent definition includes lease of equipment, lease of furniture, fittings which cannot be considered as 'house property Moreover, even if assessee has let out property but when the memorandum of association permits the business of letting out of properties as such, the income cannot be brought to tax as 'income from house property' as held in the case of Chennai Properties & Investments Ltd. 373 ITR 673. It was held by Supreme Court that where in terms of Memorandum of Association, main object of the assessee-company was to acquire properties and earn income by letting out the same, the said income is to be brought to tax as 'income' from business and not as 'income from house property' ITAT Hyderabad in Heritage Hospitality Limited [2016] 68 taxmann.com 150 (Hyderabad - Trib.) JANUARY 22, 2016

Amount recoverable from wholly owned Indian subsidiary was assigned to another company by non resident company assessee for loss. Held by ITAT Mumbai that even though an advance, a debt or a recoverable amount is a 'current asset' from an accountant's perspective, as long as such an advance, debt or recoverable amount satisfies the requirements of Section 2(14), it will have to be treated as a 'capital asset' for the purposes of computation of capital gain. The concept of 'current asset' is alien to the law on taxation of capital gains, or, for that purpose, to the law on taxation of income. Further as per Section 9(1)(i) any income, "through the capital asset situated in India" is deemed to accrue or arise in India, the debt being recoverable from company in India is a capital assets in India. As a corollary to this taxability of income, the loss through the capital asset situated in India is also required to be taken into account. Also the transaction satisfies the definition of term “transfer” u/s 2(47) as it is sale of debt. The sale of trade debts, or even loans, is a part of day to day trade and commerce. Hence loss from assigning the amount recoverable from Indian entity is short term capital loss which can be set off against capital gain Income of the assessee non resident company

Siemens Nixdorf Informationssysteme GmbH [2016] 68 taxmann.com 113 (Mumbai - Trib.) MARCH  31, 2016 

The assessee was entitled to depreciation under section 32 of the Act in respect of the immovable properties taken over by it from the State Government, even though their legal ownership had not been transferred to the assessee –Corporation- J&K Tourism Development Corporation (J&K High Court)I.T. Reference No. 15 / 1983, decided on 19.7.2000.

“Require” before you aspire the assessee to afford the facility for conducting survey says ITAT Amritsar

ITAT Amritsar Bench in an interesting decision of Smt. Kailash Devi ITA 347/ASR/ 2015 pronounced on 05-04-2016 on conduct of survey had an occasion to ponder over the obligations cast upon Income Tax Authorities under the law. Often assessee and income tax authorities are at logger-heads for assessee not acting as “required” but before authorities allege the assessee for not doing his part of obligation,  a line has to be drawn from where assesse’s  part of obligations  commence, because it is easy to tell a person how best to carry his pack  until the burden is on one’s own back.

Important Changes in ITR Forms wef AY 2016-17

1.     Where total Income of assessee is more than 50 lacs, the Individual/ HUF  assessee is required to disclose cost of Immovable Assets viz. Land and Building and Movable Assets viz. Cash in Hand, Jewellery Bullion etc., Vehicle, Yatches, Boats and Aircrafts and also Liability in relation to Immovable and Movable assets in case amounts not disclosed in Balance Sheet. Earlier assesses having total Income exceeding 25 lacs were required to disclose this information. In ITR-3 and ITR-4.

More Honeyed taxation of honey introduced w.e.f. 18-03-2016, by making unbranded honey, sale of capital goods, containers for packing of unbranded honey and beeswax used in beekeeping for production of honey tax free. Unbranded Honey was taxable @ 6.05% under entry 48 At present, Branded Honey when sold in retail packing less than 10Kg/10Lt is subject to first point taxation @ 6.88% on first sale and tax free in the hands of subsequent dealers and hence no ITC is available to subsequent buyer. However branded honey when sold in retail packing of 10Kg/10Lt and above is eligible for ITC on subsequent sale. Beeswax before this notification was taxable @ 6.05% under Entry 4 of Industrial Inputs. Bees wax is the wax secreted by bees to make honeycombs and used to make wood polishes and candles. However notification displayed on pextax.com only on 02-04-2016.

As per 3rd Proviso to Rule 36 of Punjab Vat Rules if annual tax liability of the dealer exceeded Rs. 2 lacs during previous year, he was required to file monthly Vat 16 during all subsequent years irrespective of the fact his tax liability decreases from Rs. Two lacs. The excise and taxation department vide Notification dated 20-02-2016 but displayed on website on 02-04-2016, has removed this requirement by omitting third proviso to Rule 36. This shall provide the assesses much desired relief from unnecessary filing of monthly returns and is a step in right direction. Hence the monthly filing of return is required only if annual tax liability of previous year exceeded Rs. 2 lacs and not in subsequent year

Analysis of Changes in Taxation of Yarn and Building Material in Punjab Vat Law effective from Ist April 2016.

Taxation of yarn and building material has been changed  by Excise and Taxation department by introducing Notifiations dated 31-03-2016 wef 01-04-2016.  In this write up an attempt has been made to analyse the law with this  advent of Excise and Taxation department.

Acquatic feed, polutary feed and cattle feed are already tax free. Now pig feed also made tax free under entry 4 of Schedule A. Earlier all types of acquatic feed was tax free but now only feed for acquatic fish made tax free. Feed for other acquatic creatures might get taxed

Sale of new and renewable sources of energy devices or systems, equipments, structures, machinery , capital goods covered under notification of department of technology are declared tax free wef 01`-10-2013 vide entry no. 85 of Schedule A. Since renewable energy devices and spare parts under entry 94 made them taxable @ 6.05%, the relevant entry in Schedule B omitted with retrospective effect i.e. from 01-10-2013 to remove any ambiguity in this respect.

Stone and bajri taxable @ 6.05% replced by trip wise taxation. Vat Rs. 4000/- per trip for sand and bajri carried in tractor trolley, Rs. 7000/- per trip when carried in truck up to 9MT capacity, Rs. 10000/- per trip if carried in bigger vehicle. New rates effective from 01-04-2016.vide notification dated 31-03-2016

W.e.f 01-04-2016, the shows of Punjabi films exempted from entertainment tax vide order dated 31-03-2016.

Punjabi culture and music shows exempted from payment of entertainment duty w.e.f 01-04-2016 vide Notification dated 31-0-2016.

The Punjab Bureau of Investment Promotion has been empowered to issue provisional registration for Vat immediately on receipt of application. There after Bureau shall send application to concerned officer. Concerned officer, if satisfied shall issue registration certificate on priority for handing over to concerned person with in 7 days from making application. [Notification dated 31-03-2016]

Tax Rate circular for Yarn issued by Vat department a) Tax rate on all types of yarn (including cotton yarn), their waste and sewing thread reduced to 3.3% b) Tax Rate on 100% Polyester Yarn, polyester top, polyester chips, polyester staple fibre and waste and acrylic fibre retained at 5.5% .1. Vat Advance tax rate on all types of yarn including cotton yarn , waste of yearn and sewing threads reduced to 3.3% . Earlier rate was 5.5% for all types of yarn except cotton yarn which was 4.5%. However advance tax rate on 100% polyester yarn , polyester top, polyester chips, polyester staple fibre and its waste , acrylic fibre retained at 5.5%. These changes shall be effective from 01-04-16 vide Notification dated 31-03-2016. As per Punjab Vat Notifications issued Earlier in the day on 01-04-2016, 100% polyester yarn was brought to advance tax under 5.5%. However, in later spate of notifications, it was replaced by “100% polyester filament yarn”. Thus 100% polyester yarn shall get covered by 3.3% tax rate only. Partially oriented Yarn i.e. POY shall also get covered by 3.3% tax rate.

Exemption from income-tax to disability pension, i.e., “disability element” and “service element” of a disabled officer of the Indian Armed Forces

1. Reference have been received in the Board regarding exemption from income-tax to disability pension, i.e. “disability element” and “service element” of a disabled officer of the Indian Armed Forces.

2. It appears that field formations in certain cases are not uniformly allowing disability, pension in spite of Board’s Instruction No.136 dated 14th January, 1970 [F. No. 34/3/68-IT(A-I)].

3. The matter has been re-examined in the Board and it has been decided to reiterate that the entire disability pension, i.e. “disability element” and “service element” of  a disabled officer of the Indian Armed Forces continues to be exempt from income-tax.

Instruction : No. 2, dated 2-7-2001.

Assessee was engaged in business of contract work of military engineering services - Assessing Officer having found that assessee disclosed lower gross profit rate 7.20 per cent in relevant year, in comparison to 10.25 per cent in immediately preceding year despite three fold increase in gross receipt and assessee had not maintained salary register, payment register etc., rejected books of account of assessee and estimated income of assessee by applying net profit rate of 12.5 per cent - Whether since explanations of assessee that gross receipts had substantially increased by three times for which assessee had to reduce margin, and that contract works were executed in military and air force areas where working hours were lesser in comparison to normal civil work and that cost of various expenses and material had also been increased, was not rebutted by revenue, gross profit rate applied by Assessing Officer could not be sustained - Held, yes - Whether on facts, it would be fair and reasonable if net profit rate of 7.50 per cent was applied subject to interest to third parties, depreciation, interest to partners and salary to partners - Held, yes-Shri Ram Traders [2013] 37 taxmann.com 427 (Jodhpur - Trib.)

Books of Accounts can not be rejected for mere absence of a few vouchers

1. Vishal Infrastructure Ltd. vs Assistant Commissioner Of ... on 29 March, 2006 2007 104 ITD 537 Hyd
2. Kerala High Court in the case of CM. Francis & Co. (P.) Ltd. v. CIT
3. Allahabad High Court in another case of Imran Ahmed v. CIT 1982 Tax LR (NOC) 111 (All.) 

Any transfer by way of conversion of bonds or debentures, debenture-stock or deposit certificates in any form, of a company into shares or debentures of that company is not regarded as transfer u/s 47(x). As per Rule 8AA inserted vide Notification dated 17-03-2016 , In the case of a capital asset, being a share or debenture of a company, which becomes the property of the assessee in the circumstances mentioned in clause (x) of section 47 of the Act, there shall be included the period for which the bond, debenture, debenture-stock or deposit certificate, as the case may be, was held by the assessee prior to the conversion.

Scheme of Taxation for Provident Funds, Approved Super Annuation Funds and New Pension Fund revisited after amendments proposed in Finance Bill 2016

Feb 2016 witnessed a few important changes for salaried class assessee enjoying their provident fund bounties. While vide Government Notification dated 10-02-2016   withdrawl of employer contributions till 58 years of age was prohibited,  Finance Bill 2016 created mayhem over taxability on withdrawl of entire provident fund accumulations. The amendment  was made to move to the regime of EET (i.e. Exempt, Exempt, Tax) from present regime of (Exempt, Exempt and Exempt). Although Finance Minister has announced the retraction of its proposal to tax provident fund withdrawl, there are other large number of other amendments also with regard to employee benefits, which have gone unnoticed in this buzz.

Whether reimbursement of actual expenditure on which the payer has deducted TDS ought to be considered by the assessee as a gross receipts or the assessee was under a bona fide impression that reimbursement of expenditure does not involve element of income and not required to be considered as a part of gross turnover. After perusing various invoices raised by the assessee on its clients which are placed in the paper-book, we are of the view that the assessee remained under a bona fide impression that the expenditure incurred on behalf of its clients regarding payment of customs duty, transportation/freight charges, forklift charges, etc. were not required to be retained by the assesse [Aasita International-ITAT Pune 19-011-2015]

Out of Pocket expenses seperately received in advance or otherwise shall not form part of turnover for audit purpose . Hence no penalty held levialble u/s 271B- Shashank Rakesh Aggarwal [ITAT Mumbai]

Powers regarding discovery, and production of evidence given to the IT authority under s. 131 are the same powers as vested in a Court under CPC while trying a suit—Existence of a suit or a proceeding is a sine qua non for exercise of such power under CPC—Therefore, power mentioned in sub-s. (1) of s. 131 can be exercised only if a proceeding is pending before the concerned officer and not otherwise—This interpretation is consistent with the scheme of the sub-s. (1A) of s. 131 according to which it is competent for Asstt. Director of Inspection to exercise powers under s. 131(1) under certain circumstances even in absence of any pending proceedings [JAMNADAS MADHAVJI & CO. & ANR. vs. J.B. PANCHAL, INCOME TAX OFFICER & ANR ) 162 ITR 0331 HIGH COURT OF BOMBAY]

Supreme Court in Kathiroor Service Cooperative Bank Ltd.[August 27, 2013.] on Scope of 133(6)

The appellant-assessee is a Service Co-operative Rural Bank. The Income Tax Officer to the assessee under Section 133(6) of the Act calling for general information regarding details of all persons (whether resident or non-resident) who have made (a) cash transactions (remittance, transfer, etc.) of Rs. 1,00,000/- and above in any account and/or (b) time deposits (FDs, RDs, TDs, etc.) of Rs. 1,00,000/- or above for the period of three years between 01.04.2005 and 31.03.2008, dated 02.02.2009. It was expressly stated therein that failure to furnish the aforesaid information would attract penal consequences. The assessee objected to the said notice on grounds, inter alia, that such notice seeking for information which is unrelated to any existing or pending proceeding against the assessee could not be issued under the provisions of the Act and requested for withdrawal of the said notice Section 133 provides for the power of authorities under the Act to call for information for the purposes prescribed therein. Sub Section (6) of Section 133 of the Act, as it stood originally, had provided for calling for information in relation to such points or matters which would be useful for or relevant to any proceeding under the Act from any person including a banking company or any officer thereof. It was settled law that unless a proceeding is pending, the powers under Section 133(6) could not be exercised by the Assessing Authorities. In such circumstances, an amendment was made by the Finance Act, 1995 (Act 22 of 1995), with effect from 01.07.1995, inserting the words “enquiry or” before “proceeding” in Section 133(6) and the second proviso to the said provision The addition of the word “enquiry” expanded the ambit of exercise of powers by the authorities under Section 133(6) to seek for information which would be useful for or relevant to any enquiry besides proceeding under the Act. The second proviso to Section 133(6), specified that the power in respect of an enquiry, in case where no proceeding is pending, shall not be exercised by any income tax authority below the rank of Director or Commissioner without the prior approval of the said authorities. The effect of the amendments made by the Finance Act (Act 22 of 1995) was explained by the CBDT in the Circular No. 717, dated 14th Aug., 1995 (See Taxmann ’s Direct Taxes Circulars, Vol. 4, 2002 Ed., p. 2.1759, 2.1782) as follows : At present the provisions of sub-section (6) of section 133 empower income-tax authorities to call for information which is useful for, or relevant to, any proceeding under the Act which means that these provisions can be invoked only in cases where the proceedings are pending and not otherwise. This acts as a limitation or a restraint on the capability of the Department to tackle evasion effectively. It is, therefore, thought necessary to have the power to gather information which after proper enquiry, will result in initiation of proceedings under the Act. 41.3 With a view to having a clear legal sanction, the existing provisions to call for information have been amended. Now the income-tax authorities have been empowered to requisition information which will be useful for or relevant to any enquiry or proceedings under the Income-tax Act in the case of any person. The Assessing Officer would, however, continue to have the power to requisition information in specific cases in respect of which any proceeding is pending as at present. However, an income-tax authority below the rank of Director or Commissioner can exercise this power in respect of an inquiry in a case where no proceeding is pending, only with the prior approval of the Director or the Commissioner. Since the language of the Section 133(6) is wholly unambiguous and clear, reliance on interpretation of statutes would not be necessary. Before the introduction of amendment to Section 133(6) in 1995, the Act only provided for issuance of notice in case of pending proceedings. As a consequence of the said amendment, the scope of Section 133(6) was expanded to include issuance of notice for the purposes of enquiry. The object of the amendment of section 133(6) by the Finance Act, 1995 (Act 22 of 1995) as explained by the CBDT in its circular shows that the legislative intention was to give wide powers to the officers, of course with the permission of the CIT or the Director of Investigation to gather general particulars in the nature of survey and store those details in the computer so that the data so collected can be made use of for checking evasion of tax effectively. The assessing authorities are now empowered to issue such notice calling for general information for the purposes of any enquiry in both cases: (a) where a proceeding is pending and (b) where proceeding is not pending against the assessee. However in the latter case, the assessing authority must obtain the prior approval of the Director or Commissioner, as the case maybe before issuance of such notice. The word “enquiry” would thus connote a request for information or questions to gather information either before the initiation of proceedings or during the pendency of proceedings; such information being useful for or relevant to the proceeding under the Act

Section 11(6) inserted by Finance Act 2014 wef AY 2015-16 disallowing deduction of depreciation of asset , the acquisition of which has been claimed as application is not retrospective in nature. Al- Ameen Charitable Fund Trust[2016] 67 taxmann.com 160 (Karnataka) FEBRUARY 22, 2016

Issue of deduction of Housing Loan Interest in case of co-owners decided by Punjab and Haryana High Court in Priya Mahajan [ITA 384/2015 dtd 26-11-2015] Facts: Plot purchased in the name of four cowners. Also they were co-borrowers of housing loan for construction of house. The assessee solely repaid entire interest and principal since the date of borrowing. While assessee claimed 100% deduction on housing loan interest, the AO restricted it to 25% having regard to assessee’s share of ownership Section 45 of Transfer of Property Act 1882 on Joint transfer for consideration.— Where immoveable property is transferred for consideration to two or more persons and such consideration is paid out of a fund belonging to them in common, they are, in the absence of a contract to the contrary, respectively entitled to interests in such property identical, as nearly as may be, with the interests to which they were respectively entitled in the fund; and, where such consideration is paid out of separate funds belonging to them respectively, they are, in the absence of a contract to the contrary, respectively entitled to interests in such property in proportion to the shares of the consideration which they respectively advanced. In the absence of evidence as to the interests in the fund to which they were respectively entitled, or as to the shares which they respectively advanced, such persons shall be presumed to be equally interested in the property. Held that : In present case though assessee has claimed to have paid entire consideration for purchase of plot/construction, no evidence has been produced. In the sale deed since shares of individuals are not specified. Section 45 of Transfer of Property Act shall apply. In the case of Saiyed Abdullah v. Ahmad AIR 1929 All. 817, the Hon'ble Allahabad High Court held that 'in the absence of specification of the shares purchased by two persons in the sale deed, it must be held that both purchased equal shares. In present case, since the individual shares were not specified in the sale deed, the logical conclusion is that everyone had equal share in the property. Hence allowance of 25% of Housing Loan to assessee borrower is correct even if the assessee solely repaid entire interest and principal since the date of borrowing.

The issue of deductibility of Subsidies as profits derived from undertaking stands resolved by Supreme Court in its Landmark Judgment in Meghalya Steels on 09-03-2016

Exemption available under Chapter VI-A in respect of profits of industrial undertakings is available only in respect of income qualifying the litmus test of “profits or gain derived from undertaking”. The revenue and assessees have been locking their horns over the issue of Subsidies for years together as to whether or not they are covered by term ““profits or gain derived from undertaking”

                             In this article while an attempt has been made to construe real meaning of words “profit derived from”, it also deals with purpose test of subsidy and its relevance after recent amendments in Finance Act 2015 and Finance Bill 2016.

CBDT vide letter dated 08-03-2016 has clarified that the monetary limit of Rs. 10 lakhs imposed vide Circular No. 21/2015 dated 10-12-2015 for filing appeals before the ITAT would apply equally to cross objections under section 253(4) of the Act. Cross objections below this monetary limit, already filed, should be pursued for dismissal as withdrawn/not pressed. Filing of cross objections below the monetary limit may not be considered henceforth i.e. wef 08-03-2016

CBDT vide letter dated 11-03-2016 has reiterated that cases where tax has been deducted but not deposited by deductor, deductee assessee shall not be called upon to pay the demand because section 205 puts a bar on direct demand against the assessee in such cases. CBDT has issued similar instructions on 01-06-2015 also.

CBDT instructs officers to verify cases of agriculture Income more than one crore in resposne a PIL matter pending before Hon'ble Patna High Court wherein concerns have been raised that a few assesses may be engaged in routing their unaccounted/illegal money in the garb of agricultural income thereby not only claiming exemptions on such income but also engaged in the money laundering activities. Also CBDT has advised that there may be data entry errors also resulting in income being reflected more than one crores. List of cases where agiculture income is more than one crore has been made available to officers. In Amritsar 26 cases have been reported [CBDT Letter dated 10-03-2016]

Analysis of Amendment relating to Presumptive Taxation of Business

Section 44AD widely affects the businesses in small sector. It was brought in its present shape by Finance Act 2009 wef AY 2011-12. It implies that legislature at that time thought it fit to take a year extra to have impact study of the section. However section 44AD has been amended by Finance Bill 2016, wef Financial year commencing from 01-04-2016, without providing enough time and space to thinks about its implications. This article is a humble attempt to look into and look through amendments proposed in section 44AD  as amended by Finance Bill 2016

CBDT circular favoring the assessee is binding on the department even if it is not as per legislative intent [Para 25] Vodafone Essar Mobile Services Ltd [2016] 67 taxmann.com 124 (Delhi) MARCH 9, 2016 As per section 201(3) before amendment by Finance Act 2014 it was provided wef AY 2010-11 that order for default in payment of TDS for financial years commencing on or before 01-04-2007 could be passed till 31-03-2011. However as per Circular 5/2010 of CBDT “…………….. To provide sufficient time for pending cases, it is proposed to provide that such proceedings for a financial year beginning from 1st April, 2007 and earlier years can be completed by the 31st March, 2011………………” . Held by Delhi High Court that since extended limitation period as per CBDT circular is applicable only to pending cases, hence for period before AY 2010-11, limitation period of 4 years as pronounced by Delhi High Court in NHK Japan following supreme court in Bhatinda District Co-op Mil Producers Union [2007] 9 RC 637; 11 SCC 363 is reasonable and shall apply accordingly

Issue of allowing TDS to assesses following cash system of accounting: As per section 198, sum deducted is deemed to be income received. Further Rule 37BA(3)(ii) allowing tds credit in the proportion of income assessable is applicable where income is received over number of years. However, if income is not received at all, Rule 37BA(3)(ii) shall not apply. Again Rule 37BA(i) allowing credit of TDS in the assessment year for which tax is assessable shall have effect of not at all allowing the credit of TDS if no amount is received. Hence Rule 37BA (3) is not applicable to cash system of accounting. Hence where assessee following cash system of accounting had reflected tds as income u/s 198 is entitled to claim full credit of tds in the year of deduction itself although corresponding income not reflected in the year of deduction. Held by ITAT Delhi in Chander Shekhar Aggarwal [2016] 67 taxmann.com 62 (Delhi - Trib.) pronounced on 11-01-2016 following Sadhbhav Engineering (Ahd Trib) and Vishakhapatnam Trib in Peddu Srinivasa Rao

Whether registration fee, processing fee and other fee charged by Vat department from vat dealers shall become exigible to service tax w.e.f. 01-04-2016:

As per NN 6/2016 dated 18-02-2016 read NN 7/2016, all services by government to business entities having turnover more than 10 lacs shall become taxable under service tax law w.e.f. 01-04-2016. As per Rule 40A of Punjab Vat Rules w.e.f 01-10-2013, every taxable person is required to pay annual processing fee in the month of October. Further registration fee of Rs. 2000 u/R3 (2); duplicate RC fee Rs. 100/-u/R 6; Amendment and other purpose fee u/R 87; Fee of Rs. 2500/- for disputed questions u/R 89 rws S.85, might also get covered.  Held by Supreme Court in Om Parkash Aggarwal v. Giri Raj Kishori (164 ITR 376) that fee is a charge for a special service rendered to individuals or a class by some governmental agency. A fee is a sort of return or consideration for services rendered, though it may not be based upon expenses or costs incurred by Government. At present as per NN30/2012, service tax on reverse charge shall be payable by service recipient’s only if support service is provided by government. This means at present if at all service tax is levied on annual processing fee, it shall be collected from the state government and not dealer. However  NN 30/2012 is most likely to be amended to be aligned with amended provisions of S.66D(a) and then service tax liability might fall back on dealers. Other services that might get covered are MCA filing fee, motor vehicle registration fee, other fee for obtaining licenses, registration, permissions etc.

The Notice itself does not indicate the approximate amount of income, which the Assessing Officer has reason to believe has escaped assessment- Bombay High Court in Khubchandani Healthparks

It is settled position in law that the decision of the Court has to be read in the context of the facts involved therein and not on the basis of what logically flows therefrom as held by the Supreme Court in Ambica Quarry Works Vs. State of Gujarat, 1987(1) SCC 213. The Apex Court in Zuari Estate Development and Investment Co. Ltd. (Supra)not having dealt with the issue of reason to believe that income chargeable to tax has escaped assessment on the part of the Assessing Officer in cases where regular assessment was completed by Intimation under Section 143(1) of the Act, it would not be wise for us to infer that the Supreme Court in Zuari Estate Development and Investment Co. Ltd. (Supra) has held that the condition precedent for the issue of reopening notice namely, reason to believe that income chargeable to tax has escaped assessment, has no application where the assessment has been completed by Intimation under Section 143(1) of the Act. The law on this point has been expressly laid down by the Apex Court in the case of Rajesh Jhaveri Stock Brokers P. Ltd. (Supra) and the same would continue to apply and be binding-Bombay High Court in Khubchandani Healthparks

It is settled position in law that the decision of the Court has to be read in the context of the facts involved therein and not on the basis of what logically flows therefrom as held by the Supreme Court in Ambica Quarry Works Vs. State of Gujarat, 1987(1) SCC 213

Supreme Court has affirmed the decision of Allhabad High Court in Society for The Promotion of Education Adventure Sports on 16-02-2016 allowing deemed registration of trust after six months where registration not granted in six months. Earlier Allahabad High Court full bench in Muzafarnagar Development Authority on 05-02-2015 had reversed division bench decision in Society for The Promotion of Education Adventure Sports which now stands restored back . Earlier CBDT vide Instruction dated 06-11-2015 had also directed to follow the time limit of six months strictly.

Changes made in service tax relating to service by Government to business entity : As per section 66D on negative list of service while service provided by government and local authority are generally not taxable, support services services provided by Government to business entity have been kept in taxable category. Further in respect of support services to business entity , tax is payable on reverse charge by business entity and not government except for renting of immovable property. It included services like advertisement, construction, works contract, security and other infrastructural, administrative, operational,logistic, marketing services. However Clause 109 of Finance Act 2015 increased the ambit of taxable service from support service to any service provided by government to business entity from date to be notified later. Now by NN 6/2016 dtd 18-02-2016, the date has been notified as 01-04-2016. Furtherby NN 7/2016 dated 18-02-2016, exemption has been provided for service to business entity with a turnover up to ten lacs in preceding year.

Exports to Nepal' would be treated at par with other exports from 1-3-2012 and would not form part of turnover limit of Rs. 400 lakhs or Rs. 150 lakhs for SSI-exemption purposes accordingly, words 'and Nepal' in Explanation (G) to SSI Notification No. 8/2003-CE to treat exports to Nepal as clearance for home consumption, were struck down-Ketan Pottery Works [2016] 66 taxmann.com 259 (Gujarat)

in Swadeshi Polytex Ltd. (44) ELT 794 (SC) it has been held by the Apex Court that any unintended byproduct during the course of manufacturing of a particular goods could not be said to be an intended one

Assessee took credit of CVD/Special CVD paid on imported materials based on 'endorsed bill of entry' - Department denied credit on ground that endorsed bill of entry is not an eligible document under rule 9(1) - Assessee argued that bill of entry (even if endorsed) continues to be an eligible document under rule 9(1)(c) - HELD : There is no dispute about receipt of material and payment of duty thereon - Hence, credit taken based on endorsed bill of entry is valid, as endorsed bill of entry is also a valid document for availing credit- Suyash Chemicals [2016] 66 taxmann.com 241 (Mumbai - CESTAT)

Contribution received by assessee-trust towards corpus fund even if misused could not be treated as income for purpose of levying tax-Sri Durga Nimishamba Trust [2012] 18 taxmann.com 173 (Kar.)