Direct Tax Vista-Your Weekly Direct Tax Recap
Edn. 84| Dated: 22.11.2023.
CA Vivek Jalan
To access the other Editions, please click the link below:
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In this edition:
1. Revenue cannot take advantage of mistake/ignorance of the assessee: Claim for housing loan interest and principal and Mediclaim u/s 24(b), 80C and 80D can be made vide rectification u/s 154
Chatterjees are making headlines. Mrs Chatterjee made headlines in the movie Mrs Chatterjee Vs Norway and now Mr Chatterjee may make headlines in a case which would certainly provide relief to many small assesses…
2. Only those evidences may be produced during the CIT(A) stage which have already been produced at the assessment stage other than in given circumstances
Assessment stage is the best stage to present all evidences and represent on the basis of facts. Rule 46A of Income Tax Rules requires that only those evidences may be produced during the CIT(A) stage which have already…
3. Lower authorities directed to accept Form No.10 filed by trusts belatedly and grant consequential relief
Form 10B incase of trusts have provided sleepless nights to auditors and assesses this year. Many auditors, we are aware, have not even taken the task to fill up and file a close to 50 page form…
4. The quantum of revenue accruing to a taxpayer in India can be attributed to activities carried out in India and shall be derived at on the basis of FAR Analysis
Explanation 1(a) under clause (1) of Sub-Section (1) of Section 9 of the Income Tax Act, reads as follows: 9. Income deemed to accrue or arise in India – (1) The following incomes shall be deemed to accrue or arise in India:…
5. Addition cannot be made in hands of beneficiary who has explained the source of the deposit satisfactorily
Section 69A of Income Tax Act specifies as under – “69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion…
6. Section 54F deduction available on reinvestment of capital gain earned on relinquishment of right in partnership firm
Section 2(14) provides that “capital asset” means- “(a) property of any kind held by an assessee, whether or not connected with his business or profession;… but does not include- (i) any stock-in-trade…
7. Foreign exchange fluctuation losses are allowable deduction being a fait accomopli and not a notional loss of contingent nature
AS-11 and AS-30 issued by the ICAI, require that loss/gains on outstanding derivatives contracts are to be recognized on mark to market basis. These Accounting Standards recognise the difference…
8. Nobody advances a loan, in arm’s length situation, at a nil rate of interest
Several types of debts, particularly long term unsecured debts, and revenue participation investments could be termed as ‘quasi capital. So far as arm’s length price of such transactions are concerned, this cannot be ‘nil’…
9. Functionality for processing of electronically filed valid returns (upto AY 2017-18) having refund claims which were not processed within the time allowed u/s 143(1) due to some technical or others reasons
By virtue of Order F. No. 225/98/2020-ITA-II, dated 30-09-2021, the CBDT directed that all validly filed returns up to Assessment Year 2017-18 bearing refund claims could be processed until 30-11-2021…
10. Half Yearly Format, Procedure and Guidelines for submission of Statement of Financial Transaction (SFT) for Mutual Fund Transactions by Registrar & Share Transfer Agent and for Depository Transactions
In 2003, the ‘Annual Information Return (AIR)’ was introduced under Section 285BA of the Income Tax Act. It was later repealed by the Finance Act of 2014, which renamed it ‘duty to produce a statement…
Direct Tax Vista-Your Weekly Direct Tax Recap
Edn. 83 | Dated: 15.11.2023.
CA Vivek Jalan
To access the other Editions, please click the link below:
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In this edition:
1. Non-residents can Invest in Government-issued SGBs through ‘Fully Accessible Route’ for F.Y. 2023-24
The RBI vide Circular No. RBI/2023-24/81 FMRD.FMID.No. 04/14.01.006/2023-24, Dated 08.11.2023 has decided to designate all Sovereign Green Bonds issued by the Government in the fiscal year 2023-24 as ‘specified securities’…
2. Does the Income Tax Law debar a charitable institution from getting registered until it is registered under another Law?
Consider a society or any other charitable institution or a mere association of persons formed for public welfare. Does the Income Tax Law debar it from getting registered until it is registered under another Law?…
3. Provision for sales incentive determined on a scientific basis cannot be regarded as a contingent liability and disallowed under the Income Tax Act
It is a settled position that sales incentive determined on a scientific basis cannot be regarded as a contingent liability and disallowed under the Income Tax Act. However, again and again the disallowances…
4. Where the AO elaborately gives a factual finding on incriminating material, the assessee has to controvert on merits
A seized document partakes the nature of incriminating material relevant for making assessment when it is established that the transaction is undisclosed or unexplained and the income earned out of such transaction…
5. Business expense cannot be disallowed merely because the assessee had not set up/started its business activities during the year
AOs cannot disallow expenses as there is no substantial income in one year, by considering that expenditures are not incurred wholly and exclusively for the purpose of business…
6. Disallowance cannot be made on an adhoc basis
Disallowance cannot be made on an adhoc basis as held by The Hon’ble Supreme Court of India in the case of Pr. CIT vs. R.G. Buildwell Engineers Ltd. (2018) 99 taxmann.com 283 (Del)…
Direct Tax Vista-Your Weekly Direct Tax Recap
Edn. 82 | Dated: 08.11.2023.
CA Vivek Jalan
To access the other Editions, please click the link below :
Link- https://taxconnect.co.in/direct-tax-vista/
In this edition:
1. Cross border Payment Aggregators like Amazon (Pay) India, Google India, Razorpay, Pine Labs, PayPal, Cashfree, Paymate, etc to be directly regulated by RBI now
The RBI will directly regulate all entities facilitating cross-border payment transactions for the import and export of goods and services. That the Indian digital payments ecosystem will get heavily regulated now…
2. Transporters income tax assessments will have volume and payment to unorganised sectors… AOs need to dig into nitty gritties
Each Industry has its own set of nuances and the AOs need to conclude assessments taking into account these nuances. For transporters, it will always be the case where…
3. Minor changes in Form ITR-7 for trusts from AY 23-24
The CBDT vide Notification No. 94/2023 has notified New Changes in Form ITR-7 for Non-profit making enterprises and these shall come into effect from…
4. Tax Agreement with Saint Vincent and the Grenadines
The CBDT has notified Tax Agreement between India and Kingstown, Saint Vincent and the Grenadines via issuing Notification 96. The agreement was signed at…
5. Tax Officers cannot direct taxpayers how to do business; “Managerial services” are not included under “Fees for Included Services”
Tax Officers cannot direct taxpayers how to do business. This is an accepted principle in tax matters and we all have been taught the same from when we began…
6. Natural justice prevails even in case of latches by appellant
Doctrine of latches basically asserts that the court will not help people who sleep over their rights and help only those who are aware and vigilant about their rights…
7. Apex Court’s judgement for NPOs in AUDA Case only for GPU… and not other limbs of Section 2(15)
The Hon’ble Apex Court declared that specific incomes themselves may or may not be exempt under Income Tax Act in the case of trusts in the judgement in 2nd half…
8. Provisions contained in section 269SS & 269T is confined to loans and deposits only and does not extend to purchase/sale transaction
CBDT in its explanatory note on the provisions of the Finance Act, 1984 vide Circular No.387 dated 6th July, 1984 clarified that the provisions contained in section 269SS…
Direct Tax Vista-Your Weekly Direct Tax Recap
Edn. 81 | Dated: 31.10.2023.
CA Vivek Jalan
For accessing other editions, please click the link below:
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In this edition:
1. Income Tax bitter pill for the business of prescription of medicines
Not every doctor is corrupt and not every pharmaceutical firm resorts to unethical means to sell their products. However, there is no denying that a large number of doctors and medical companies adopt unfair means…
2. Domestic Companies availing benefit of 22% tax can filed Form 10-IC for AY 21-22 by 31st January 2024
Procedurally, Form 10-IC is required to be filed if a Domestic Company chooses to pay tax at concessional rate of 22% under Section 115BAA of the Income Tax Act. However, effective tax rate including cess and surcharge is 25.17%…
3. Overall prosperity and better distribution among Income Taxpayers; Compliance is improving too…but still work is to be done
Data released by the CBDT has revealed that there has been improved taxpayer compliance with 7.41 crore income tax returns being filed so far for assessment year 2023-24, including 53 lakh new, first-time filers…
4. Role of PrCCIT (NaFAC) restructured to make faceless assessments procedure more robust
The CBDT has modified the order issued under section 119 vide F. No. 1 87/3/2020-ITA-I dated 31-03-2021, assigning the role of PR. CCIT (NaFAC) under Faceless Assessment Scheme 2019…
5. Where it can be proved that the source of cash payment has been out of known source of income, then addition u/s. 69C does not sustain
An often-followed modus operandi for booking bogus purchases is that the accommodating party receives cheques from the assessee towards purchase of goods or services and returns the money by cash after deduction…
6. Understanding Income of Royalty and Fees For Technical Service
To understand royalty income and Fee from Technical service(FTS), lets understand the case of sale of computer wherein software is uploaded on the computer. For any problem in the computer, the seller enters…
7. Section 263 can be invoked only when incriminating evidence was unearthed during search, or unabated assessments are erroneous nor prejudicial to interest of revenue
The jurisprudence in the matter of invocation of Section 263 is quite settled, but still cases are argued and we keep reporting. Share application money received is always under the ambit of scrutiny and one way of disallowing…
8. Incase income is not derived from the exercise of property rights only, but is derived from carrying on an adventure or concern in the nature of trade, the income will be considered as a business Income
Income under the Income Tax Act is to be assessed under any of the 5 heads of income. Section 22 and 28 concern income from house property and business income respectively. If the income from a source fall…
Direct Tax Vista-Your Weekly Direct Tax Recap
Edn. 79 | Dated: 17.10.2023.
CA Vivek Jalan
To access other editions, please click the link below:
Link- https://taxconnect.co.in/direct-tax-vista/
In this edition:
1. Inventory verification and valuation needs to be done meticulously; mere allegation of the entries being an ‘afterthought’ would not prevail
The Finance Act 2023 has taken a major step forward by introducing the concept of inventory valuations by Cost Accountants in specific cases, as granted by Section 142(2A) of the Income Tax Act…
2. Supply of goods cannot be vivisected to alienate services portion for levying TDS u/s 195
Every supply of goods always has an element of supply of services and it is the principal supply by which the entire transaction is accounted for. Pure supply of goods along with supply of certain services like loading…
3. To write off a loan/advance/investment, it has to be explained why it was made in the first instance
In case loans/advances/investments are written off in a year, first and foremost requirement is to prove the financial justification/ business expediency and need for making the loans/advances/investments…
4. Section 50C of Income Tax applicable on a Gift to a daughter in certain cases
The question of law is that where an immovable property is transferred by the assessee to his relative without any consideration, Is the said transfer taxable in the hands of the relative in view of the provisions of Section 50C…
5. CBDT Notification No 88/2023 Dated 10 October 2023: Amendment in Rule 114B, 114BA & 114BB: for furnishing declaration in Form 60 by person not having PAN; Company/Firm have to possess a PAN
The CBDT has amended rules related to obtaining and quoting PAN. The amendments have been made in Rules 114B, 114BA and 114BB of The Income Tax Rules along with Form 60…
6. “Income” is more than “Income Chargeable to Tax”; and “Income Chargeable to Tax” is more than “Income Tax”
Section 148A of Income Tax Act was inserted in the IT Act w.e.f. 1.4.2021 to render the power of Revenue of reopening cases to be more transparent so as to avoid casual invocation of Section 147/148…
7. Reopening of assessment cannot be made on basis of change of opinion
A plethora of judgements are there on the grounds that Reopening of assessment cannot be made on basis of change of opinion. Few more pronounced by The Hon’ble Bombay High Court…
8. Section 271(1)(c) cannot be invoked due to a difference of opinion
Section 271(1)(c) provides that if the AO or JC(A) or the CIT(A) or the PCIT or CIT in the course of any proceedings under The Income Tax Act, is satisfied that any person has concealed the particulars of his income…
9. No TDS on freight u/s 194C in case the GTA owns ten or less goods carriages at any time during the previous year
TDS on freight u/s 194C of The Income Tax Act may not be deducted in case where the GTA owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect…
Direct Tax Vista-Your Weekly Direct Tax Recap
Edn. 78 | Dated: 11.10.2023.
CA Vivek Jalan
For accessing other editions, please click the links below:
Link- https://taxconnect.co.in/direct-tax-vista/
In this edition:
1. “Substantial Contributors” Data to be provided by trusts, etc, only “if available” …Reason for non-availability may also be kept ready for assessment purposes
The CBDT issued Circular No. 17/2023, shedding light on crucial audit report requirements to funds, trusts, educational institutions, hospitals, and medical institutions. The circular seeks to provide explicit guidance…
2. If Income Tax Demand is on the basis of GST Investigations… then, when GST case is dropped, income tax case should also be dropped
We have already on earlier occasions written about data exchange between Income Tax Authorities and GST/ Indirect Tax Authorities. However, sometimes the officers go beyond too and in case there is an allegation…
3. Provision for warranty allowed only when it is determined on a scientific basis and as per historical trend
Provision for warranty expenses should have a scientific co-relation with sales of respective years and should not be a mere average of figures of different years. Simple average of warranty expenses…
4. Are Crates & Pellets Furniture or Plant?
The Hon’ble Bombay High Court in the case of Parle Bisleri Pvt. Ltd. in ITA No.252 of 2002 dated 15.6.2022 held that Crates & Pellets are ‘Plant’, which as per Section 43(3) of The Income Tax Act…
5. Filing of Form 10-IFA vide Rule 21AHA by new manufacturing co-operatives to avail benefit of concessional rate of Income Tax
The Taxation Laws (Amendment) Act, 2019, inter-alia, inserted section 115BAB in the Act which provides that new manufacturing domestic companies set up on or after 01.10.2019, which commence…
6. Dispute Resolution Panel cannot remand back cases… Incase it does and AO Acts on such case, then it is not legal
Section 144C (8) of Income Tax Act provides that The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order. However, it shall not set aside any proposed variation or issue…
7. Implementation of the global minimum tax Subject to Tax Rule
Pillar Two of the Two-Pillar Solution includes the implementation of a global minimum tax, as well as a new subject to tax rule (STTR). The 15% global minimum tax is now a reality in all 27 European Union (EU)…
8. Where the assessee has not earned any exempt income, no disallowance is required to be made u/s 14A of the Act
It is settled in many cases including the decision in the case of Chemin vest Ltd. vs CIT reported in [2015] 378 ITR 33 (Delhi) and CIT Vs. Ashika Global Securities Ltd. in ITAT 100 of 2014 GA _2122 of 2014…
9. Thousand culprits can escape, but one innocent person should not be punished… One last opportunity should be granted
Negligence means a breach of duty (duty to take care). It is an act of carelessness and ignorance to perform a function which a rational and prudent man would perform. Breach of duty to take care and measures…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 77 | Dated: 03.10.2023
CA Vivek Jalan
In this edition:
1. Procedure for Lower TDS u/r 28AA streamlined; Consumption Statement to be available online to deductors
For grant of certificate for TDS at lower rate or no TDS u/s 197(1) of the Income-tax Act, the Proviso to Rule 28AA (4) was notified vide Notification No. 74/2018 dated 25-10-2018…
2. If the Assessing Officer has not been able to impose penalty within period of limitation due to certain practical difficulties, the period of limitation cannot be extended
A short concept envisaged in the case of PRISTINE JEWELLERY Vs INCOME TAX OFFICER WARD [2023-VIL-1280-ITAT-SRT] is that If the Assessing Officer has not been able to impose penalty within period of limitation…
3. “Discounts and incentives” are not unexplainable “cash credits”
“Discounts and incentives” are normal in business scenario and sometimes may take substantial proportions. However, the allegation that such “Discounts and incentives” was unexplainable “cash credits” …
4. Payment for ‘Background screening and investigation services’ is neither Fees for Technical Services (“FTS”) nor royalty
The definition of Royally requires that the consideration received must be for the use of or right to use, any copyright of a literary artistic, or scientific work. As envisaged in the decision of the Hon’ble Supreme Court…
5. New Inventory Valuation guidelines under Income Tax
The Finance Act 2023 has taken a major step forward by introducing the concept of inventory valuations by Cost Accountants in specific cases, as granted by Section 142(2A) of the Income Tax Act…
6. Appeal withdrawn mistakenly restored back
Ignorance of law is not a defence. However, due to complexities of the cases where multiple assessments and re-assessments have happened for the same year, the courts do allow condonation and take up matters…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 76 | Dated: 27.09.2023
CA Vivek Jalan
In this edition:
1. New Angel Tax Rules to provide a mechanism to evaluate the shares issued by unlisted startups to non-resident investors and more
The Finance Act, 2023, brought in an amendment to bring the consideration received from non-residents for issue of shares by an unlisted company within the ambit of section 56(2) (viib) of the Income-tax Act…
2. Apex Court lays down the process of applying to Settlement Commission in Income Tax Cases
When applying to the settlement commission, the question arises whether an application can be made before the settlement commission for disclosing an income which had escaped assessment and…
3. AO has to record satisfaction that disallowance made by assessee u/s 14A r.w. Rule 8D is not correct
Section 14A (2) of The Income tax Act requires that The AO shall determine the amount of expenditure incurred in relation to such exempt income in accordance with Rule 8D, if the AO, having regard to the accounts of the assessee…
4. Expenditure on educational seminars by ‘Charitable Institutions’ related to the main object cannot be disallowed
‘Chintan Shivers’ for exchange of knowledge is not new and, without going too much in the political landscape, specially it is not new to the current Government in India. Organizing such seminars, conference, and lectures…
5. CBDT notifies classification of NBFCs into top, upper and middle layers
Section 43B(da) of The Income Tax Act provides that any interest payable on the loan taken from a Deposit-taking NBFC or a Systematically Important Non-deposit-taking NBFC shall be allowed as a deduction only when the payment is made…
6. Differential Cash from sale of property once banked will be considered as an explanation… in case evidence are maintained
Cash exchanges in a property deal have been reduced by multifarious amendments in the Income tax Act. Now the position is that the stamp duty value is more often higher than the deal value itself…
7. High Seas transactions cannot be created as a facade to hoodwink the Revenue
In a High Seas transaction, the agreement should be entered on a stamp paper. After dispatch from the port of origin and before delivery at the port of destination, the bill of lading should be endorsed in the name of the new buyer…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 75 | Dated: 19.09.2023
CA Vivek Jalan
In this edition:
1. Finally, some relaxation to Charitable Organisations under Income Tax; ITR-7, 10B & 10BB for AY 23-24 deadline extended, much ahead of time
Income Tax Compliance for Charitable Organisations have been completely overhauled since the last few years. It all started with new online registrations for all charitable Organisations and requirement of renewal…
2. Deductibility of interest on loan u/s 57 where loan amount is reinvested in FDs earning lower interest
Interest expended on loans taken from relatives and invested in fixed deposits cannot be disallowed u/s 57 on the ground of non-existence of nexus between loan…
3. Unsold flats to be considered for deemed rent under Income from House Property from date of CC… but Municipal Value to be considered as Annual Letting Value
It is now reasonably settled that rental income received from unsold portion of the property constructed by the Assessee Real Estate Developer is assessable as income…
4. Notice u/s 148 not valid while assessment is on… but replies made and considered will be an ‘opinion’ of the AO
Every tax notice should be replied on merits as well as on legal issues. This is a practical suggestion to all taxpayers and it does help them in most cases. Income Tax
5. Commercial Expediency tested u/s 37 of Income Tax Act
Multiple assessments are framed by disallowing expenses u/s 37 of The Income Tax Act. The Raipur Tribunal continues to disallow Puja Expenses In the case of…
6. Broadcasting or tournament rights are not copyrights
In the absence of any corresponding change into DTAA in terms, the unilateral amended of The Income Tax Act would have no application. Hence, even after the…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 74 | Dated: 12.09.2023
CA Vivek Jalan
In this edition:
1. Bank Accountholders undertaking specified transactions to be alert as PMLA Act becomes more stringent for Banking/NBFC/Financial and other Entities
The Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 provides for maintenance of records of the nature and value of transactions, the procedure and manner of maintaining and time for furnishing of information…
2. Puja Expenses to allowed/disallowed as business expenditure? High Courts may decide as the same ITAT is divided in opinion
Business is an integral part of the society and has to run following societal norms. In India, every person is in some way connected to some religion, it may be a person with blood and flesh or it may be an artificial person too…
3. AO has to refer case to valuation officer u/s 50C incase of difference between stamp value and sale value… he cannot decide the case only by himself
Under The Income tax Act, the AO cannot himself accept the sale consideration of a property declared by assessee and ignore the valuation of stamps authority even if the entire amount of sale consideration is re-invested…
4. A merged entity is non-operational and non-existent from the date of its merger
It is important that new entity replies to all communications made in the name of the merged entity even after the merger. Otherwise, it can lead to unnecessary litigation and cost…
5. Works Contract Business is different from a pure product business: not maintaining stock register cannot be a ground to reject books of accounts, profits have to be determined on a reasonable basis
Works Contract business is different from a pure product driven industry, wherein the margins per product are more or less fixed. In a works contract business, the nature of job, number of jobs depends on the wear and tear…
6. Revenue Vs Capital Expenditure & Depreciation on Capital expenditure – the argument continues
By terminating the services of a vendor, an assessee may intend to save the expense that it would have had to incur in the relevant previous year as well as for few more years going ahead. However, it cannot be said that this saving…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 73 | Dated: 05.09.2023
CA Vivek Jalan
In this edition:
1. From 1st October 2023 – Form 71 for Claim of TDS deducted in subsequent years but income offered for tax in earlier year
Section 155(20) of Income Tax Act was Inserted vide THE FINANCE ACT, 2023 dated 31-03-2023 and will be applicable w.e.f. 01-10-2023. It provides an important relief and specifies that Where any income has been included…
2. CBDT notifies procedure to make a reference to valuation officer during search
The CBDT has made modifications to the Income Tax Rules with the addition of Rule 13 and Rule 13A. These rules are accompanied by the introduction of two new forms: Form No. 6C and Form No. 6CA…
3. India US DTAA is applicable when payment is made to USA and services rendered by Honk Kong entity
“Bill from – ship from” transactions incase of services are quite common where services are rendered by an entity and payment is made to another entity (the provider of services)…
4. An agreement for sale of shares has to be accepted by AO unless proved fraudulent
Where all corporate, regulatory and statutory approvals, consents are given by the stock exchanges on which the Company is listed and acknowledgement from SEBI in respect of a off-market transaction for sale of shares…
5. An agreement for loan has to be accepted by AO unless proved fraudulent
Vide Finance Act, 2012, it was provided that the nature and source of any sum, in the nature of share application money, share capital, share premium or any such amount by whatever name called…
6. How to prove genuineness of gifts
As for gifts it is held in the case of RAJENDRAPRASAD BABULAL KHETAN Vs THE ACIT CENTRAL [2023-VIL-1126-ITAT-SRT] that assessees have to substantiate the sources of funds in the hands of giver of gift…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 72 | Dated: 29.08.2023
CA Vivek Jalan
In this edition:
1. Principle of Mutuality not to apply on income from deposits/ non-members, of clubs – No rethink on settled position
After the judgement in the case of Ahmedabad Urban Development Authority, many experts were of the opinion that NGOs/ Trusts could take the shelter under ‘principle of mutuality’ for the non-member part…
2. Instruction regarding implementation of the judgment of the Hon’ble Supreme Court in the case of Pr.CIT (Central-3) v/s Abhisar Buildwell Pvt. Ltd. (Civil Appeal No. 6580 of 2021)
Hon’ble Supreme Court in the case of PCIT vs Abhisar Buildwell P. Ltd. [Civil Appeal No. 6580 of 2021] dated 24.04.2023 upheld the ratio of Hon’ble Delhi High Court’s ruling in Kabul Chawla [(2016) 380 ITR 573]…
3. 139(9) Order appealable only incase taxpayer denies his liability to be assessed under The Income Tax Act
A piece of legislation ultimately aims at the wellbeing of the society at large. No technicality can be allowed to operate as a speed breaker in the course of dispensation of justice. In the context of taxes, if a particular relief is…
4. Mere non-filing of Form 10B cannot lead to denial of exemption
The CPC is not correct in denying exemption u/s 11/12A merely due to the non-filing of the audit report in Form 10B. The recent judgement of The Gujarat HC in the case of Social Security Scheme of GICEA Vs. CIT (Exemptions)…
5. TDS on year-end provision is a debatable Issue: Can’t be rectified u/s 154 of the IT Act
Section 154 of the Act provides to rectify only those mistakes which are apparent from the record and not on debatable issues. TDS on year-end provisions is one such debatable issue. Many a times, expenses are identifiable…
6. Self-disclosure of additional income Vs Evidenced undisclosed income, unearthed during search and seizure operations under Income Tax
The CBDT issued a circular F.No.286/2/2003-IT(Inv.) dated 10-03- 2003 and has expressed – “Instances have come to the notice of the Board where assessee have claimed that they have been forced to confess the undisclosed income…
7. Relief to employees from 1st Sep 2023 in valuation of Rent Free Accommodation
The Finance Act of 2023 incorporated amendments for the calculation of perquisites concerning the value of rent-free or concessional accommodation provided by employers to employees. The CBDT has now modified Rule 3 of the Income…
8. New Guidelines for Tax Exemptions Under Section 10(10D) For High Premium Life Insurance Policy
The CBDT has notified the Income Tax Amendment (Sixteenth Amendment), Rules, 2023, prescribing rule 11UACA for calculating income with respect to sum received upon maturity of life insurance policies wherein…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 71 | Dated: 16.08.2023
CA Vivek Jalan
In this edition:
1. After Company Auditors, now special auditors under Income Tax Act dispute their fees – but special auditors are different from Company Auditors
Recently Company Statutory Auditors have been in news for resigning due to dissatisfaction with their fees. Infact, they resigned before completion of the assignment or before taking the assignment itself…
2. Proving genuineness of sale of Agricultural produce in cash
In the business of agriculture, transaction in cash is a very normal phenomenon, which is recognized by the Income Tax Laws also (because of which provision of Section 40A(3) are made not applicable to agriculturists)…
3. Safe Harbour Rules extended to AY 2023-24
The Safe Harbour Rules for Transfer Pricing were introduced by the Finance Act, 2009 to reduce the transfer pricing disputes, provide certainty to taxpayers, align safe harbour margins with industry standards, and expand the scope of safe harbour…
4. Depreciation has to be allowed on block basis, even where non-operating plants remain part and parcel of the block of assets during the year
Depreciation has to be allowed on the entire block of assets as defined u/s 2(11) of the IT Act and usage (or non-usage) of individual assets of each unit cannot be considered for the purpose of depreciation…
5. Discipline regarding “quasi-criminal” penal proceedings
Discipline regarding penal action under various tax laws are widely discussed. Two interesting recent cases under Income Tax allows one to reflect further. Generally, losses are contested and seldom is it seen that assessees accept a loss return…
6. AO cannot sit in shoes of businessman and decides prudence of business decision
AO cannot challenge the investment rationale or a business decision of an assessee has been held in upteen no:of cases and was again held in the case of DCIT, CIRCLE-10(1), NEW DELHI Vs GLOXINIA INFRASTRUCTURE P. LTD…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 70 | Dated: 08.08.2023
CA Vivek Jalan
In this edition:
1. Assessments of EPC contractors cannot be done merely by assuming and comparing accounts with Form 26AS same is applicable even for professionals
EPC contractor’s business is a typical business which includes manufacture, trading as well as provision of services. The cash flows happen at the very beginning of the project and maximum purchases happen at the very beginning…
2. Offshore supplies in India by parent company and onshore supplies by Project offices – what is taxed in India and what is outside India?
Global Companies have project offices in India wherein they undertake contracts which have offshore supplies by parent companies and onshore supplies for the same project by project offices…
3. TDS on freight/charter hire always u/s 194C and not u/s 194I
TDS non-deduction certificates are issued to many shipping companies by AOs and in the current context it is a settled position now that the expression “work” means carriage of goods and passengers by any mode of transport…
4. Some non-integral cases arising out of search action shall not be transferred to the Central Charges
If the income tax department has conducted a survey u/s 133A of Income Tax Act on the basis of the tax return filed, then compulsory scrutiny is unavoidable except where the book of accounts, documents etc. were not collected…
5. Non-residential use of residential house would not disentitle from claim u/s 54F
Construction of a very small residential house on a very big piece of land, assessee not residing in the residential house, the residential house not being fit as per the status of the assessee and even Non-residential…
6. Form 3AF for Preliminary Expenses to be furnished 1 month before ITR
One of the conditions for claiming a deduction of expenses u/s 35D is that the work in connection with activities for which preliminary expenses are incurred should be carried out within the organization of the assessee…
7. Exemption from TDS for lease rents paid to units of ship leasing companies in IFSC…Lessee to scrutinize Form 1 furnished by the lessor carefully
The CBDT has exempted the tax deduction at source under section 194-I of Income Tax Act on lease rent or supplemental lease rent received by a unit operating within an International Financial Services Centre (IFSC) for the lease of a ship…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 69 | Dated: 01.08.2023
CA Vivek Jalan
In this edition:
- Section 270AA is a complete Code to decide whether Penalty is to be levied u/s 270A @200% or @50%,
Once the Income Tax demand is admitted, the penal action starts. Penal action is also subject to an immunity u/s 270AA of The Income Tax Act if the case is distinguished as “under-reported” as against “mis-reported income” …
- Sugar Manufacturing Co-operatives may now get their old IT demands dropped by filing applications u/s 154 and u/s 155(19)
The recent amendments in the Income Tax Act have provided much-needed relief to co-operative sugar factories operating in India by allowing deductions for sugarcane purchases made at or below the government-approved price…
- Co-operative Societies may get their delayed returns condoned u/s 119(2), subject to conditions
Another Circular to mitigate hardship faced by Co-operative societies claiming deduction u/s 80P of the Act which had been delayed in furnishing return of income due to delay in getting the accounts audited under respective State Laws…
- Merely blaming a Tax Consultant for wrong deductions will not absolve assessee from penalty; Tax planning may be legitimate; Tax avoidance is not
The Courts have started taking a serious view for those assesses who habitually obtain fraudulent refunds in Income tax on the basis of false claims. In such cases, merely paying the tax and interest will not suffice…
- Depreciation on leased assets allowed, even if claimed in revised return
After issuance of AS-19 issued by the ICAI, the CBDT vide Circular No. 2/2001 dated 9 February 2011 has clarified that capitalization of assets acquired under the finance lease by the lessees in their books of account…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 68 | Dated: 25.07.2023
CA Vivek Jalan
In this edition:
1. No penalty u/s 271(1)(c) of Income Tax Act consequent to an admitted liability under GST, and again admitted tax liability in Income Tax too
Information sharing between the GST department and Income Tax Dept. has become the order of the day. Further to the crackdown on ITC on purchase/expenses under GST…
2. During Election time More Flying squads will check vehicles, etc. But Notice for Seized cash needs to go before the time barred period
The Ministry of Finance has issued an SOP for the CBIC officers to get more involved in poll-vigilance as far as economic irregularities are noticed. The CBICs officers would also now be involved in a larger role…
3. India & UAE Trade may get a boost due to MOUs for currency payments between the two countries
The RBI and the Central Bank of the UAE have signed two MoUs to promote the use of local currencies and interlink payment systems. Now Payments by an Indian can be made in INR to UAE directly and payment…
4. Clarification on Taxability of Income Earned from Off-Shore Investments in Investment Fund Routed through an AIF
By the Finance Act, 2023, the definition of ‘investment fund’ under the Income-tax Act, 1961 was amended to include reference to the International Financial Services Centres Authority (Fund Management) Regulations, 2022…
5. Distribution of Income to Non-residents on offshore derivatives Instruments, exempt
The Central Board of Direct Taxes (CBDT) has amended Rule 21AK to include income arising to a non-resident as a result of the distribution of income on offshore derivative instruments within the scope of exemption under section 10(4E)…
6. Applicability of Sec 154 in assessments which reach finality at higher stages
An apparent mistake u/s 154 of Income Tax Act is one which can be found out without any efforts and reasonings or for which no detailed reason or enquiry is required…
7. To levy Sec 69A on excess cash, the burden of proof is on the AO, to bring out the alleged source
In cases falling under Sec 69A, the words used show that before any of these sections are invoked, the condition precedent as to existence of alternate source of money must be conclusively established by material on record/ evidence…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 67 | Dated: 18.07.2023
CA Vivek Jalan
In this edition:
1. No penalty u/s 271(1)(c) of Income Tax Act consequent to an admitted liability under GST and again admitted tax liability in Income tax too
Information sharing between the GST department and Income Tax Dept. has become the order of the day. Further to the crackdown on ITC on purchase/expenses under GST…
2. During Election time More Flying squads will check vehicles, etc. But Notice for Seized cash needs to go before the time barred period
The Ministry of Finance has issued an SOP for the CBIC officers to get more involved in poll-vigilance as far as economic irregularities are noticed. The CBICs officers would also now be involved in a larger role…
3. India & UAE Trade may get a boost due to MOUs for currency payments between the two countries
The RBI and the Central Bankof the UAE have signed two MoUs to promote the use of local currencies and interlink payment systems. Now Payments by an Indian can be made in INR to UAE directly and payment by a person in UAE…
4. Clarification on Taxability of Income earned from Off-Shore Investments in Investment Fund Routed through an AIF
By the Finance Act, 2023, the definition of ‘investment fund’ under the Income-tax Act, 1961 was amended to include reference to the International Financial Services Centres Authority (Fund Management) Regulations, 2022…
5. Distribution of Income to Non-residents on offshore derivatives Instruments, exempt
The Central Board of Direct Taxes (CBDT) has amended Rule 21AK to include income arising to a non-resident as a result of the distribution of income on offshore derivative instruments…
6. Applicability of Sec 154 in assessments which reach finality at higher stages
An apparent mistake u/s 154 of Income Tax Act is one which can be found out without any efforts and reasonings or for which no detailed reason or enquiry is required…
7. To levy Sec 69A on excess cash, the burden of proof is on the AO, to bring out the alleged source
In cases falling under Sec 69A, the words used show that before any of these sections are invoked, the condition precedent as to existence of alternate source of money must be conclusively…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 66 | Dated: 11.07.2023
CA Vivek Jalan
In this edition:
1.Fate of “Charitable Activities” cases u/s 2(15) in Income Tax post the Supreme Court’s judgement in the case of Ahmedabad Urban Development Authority
The Supreme Court in the case of ACIT (Exemptions) Vs. Ahmedabad Urban Development Authority and Ors. dated 19/10/2022, held as follows in Para 253 & 254…
2. No deemed dividend u/s 2(22)(e) to other than actual shareholders – beneficial shareholding should not be considered
The intention behind the provisions of section 2(22)(e) of the Act is to tax dividend in the hands of shareholders. The deeming provisions as it applies to the case of loans or advances by a company to a concern…
3. Assesses’ right in Investigation cases
Cases of bogus purchases are investigated by GST as well as Income Tax Authorities. In these cases, there is an allegation of ‘cash for cheque’ i.e. cheque payments are made by the assessee and are finally withdrawn…
4.No denial of exemption u/s 11 of Income tax for Gratuity Trust
Any trust that has been created for the purpose of managing the statutory obligations of employees of the parent trust would certainly fall within the ambit of advancement of general public utility…
5. Faceless Assessments Issues under Income Tax being decided – Portal cannot be closed without accepting or rejecting adjournment application; Revision u/s 263 cannot normally be invoked
The Faceless assessments regime is evolving and there are multiple issues which are now being taken up by Courts. Many of us have faced situations that adjournments are not granted…
6. High Seas Sale not speculative
Incase of High Seas sale, the seller neither takes nor gives delivery of goods. It is all executed vide a High Seas Sale agreement. Hence the question arose whether High Seas Sale profit was to be considered as speculative or non-speculative…
7. Taxability of Loan Waivers: Amount not taxable on receipt changes colour when it becomes assessee’s own money
Two questions of taxability arise when a loan is waived off – A. Whether the interest waived off is revenue receipt or capital receipt. B. Whether the principal waived off is revenue receipt or capital receipt…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 65 | Dated: 04.07.2023
CA Vivek Jalan
In this edition:
1. TCS on foreign spends deferred and relaxed – understand how
Once it was known that TCS on foreign remittances u/s 206C(1G) of The Income Tax Act would be invoked from 1st July 2023, it was seen that advertisements for spending in foreign exchange were made by many tour operators…
2. No Change in Transfer Pricing Tolerance Limit
The CBDT vide Notification No. 46/2023 has confirmed that there are no changes to the tolerance limit for Transfer Pricing for the Assessment Year 2023-24. The notification provides for tolerance range of 1%…
3. Relief from penalty is not a right – To avoid penalty by invoking Sec 273B, ‘reasonable cause’ for failure must be shown
Most penalty cases are argued by taking Shelter u/s Section 273B which provides that no penalty shall be imposable on a person or the assessee for certain violations, for any failure referred to in the said provisions…
4. Deduction of ESOP expenditure on ‘layout’ basis and not ‘payout’ basis
Section 37. (1) of The Income Tax Act provides that any expenditure …laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable…
5. No TDS u/s 195 on purchase of the copyrighted software itself
Generally, licenses like SAP, etc, are purchased to use the software of foreign vendors, which are subject to TDS u/s 195, considering it as royalty. However, in case the copyrighted software itself is purchased…
6. Date of transfer of capital asset is the date of transfer of possession and not the date of the development agreement or advance
Section 2 (47) (v) of Income Tax Act provides that “transfer”, in relation to a capital asset, includes any transaction involving the allowing of the possession of any immovable property to be taken or retained…
7. “Purpose Test” for determining whether a subsidy is capital/revenue receipt
To determine whether a subsidy receipt is to be treated as capital or revenue receipt, the ‘purpose test’ laid down by the Supreme Court in Commissioner of Income-tax v. Ponni Sugan and Chemicals Ltd…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 64 | Dated: 27.06.2023
CA Vivek Jalan
In this edition:
1. Global Minimum Tax (GMT) on Fast track – First 50 member per-to-peer knowledge sharing meeting held
Global Minimum Tax (GMT) seems to be on Fast track and may achieve its launch date for Pillar 2 on 1st January 2024. The OECD’s Forum on Tax Administration (FTA) Pillar Knowledge Sharing Network…
2. Transfer of Capital Asset will be taxed in the year of possession and not year of payment
There is a question while computation of Capital Gain or Capital loss on transfer of immovable property that incase payments were made in parts over a period, in which FY will the capital gain or loss be assessable…
3. Demonetization Cash Deposits – Source cannot be considered as unexplained u/s 69 even when deposit is in Violation of RBI guidelines
Demonetization cases are now at various appellate stages as after having been adjudicated and the jurisprudence is now being developed. The question in many cases where B2C/ B2B Sales are involved…
4. Modalities for Getting in and out of New Scheme of Income Tax
Vide CBDT Notification No. 43/2023 dated 21.06.2023, a new rule 21AGA has been inserted to implement changes announced in the FY24 budget and to set out the modalities for tax payers…
5. E-Appeals Scheme Expanded
The e-Appeals Scheme, 2023 will usher a digital platform to handle appeals filed under Section 246 and/or certain clauses of Section 246A of the Income-tax Act, 1961. Taxpayers will be able to file and track their appeals online…
6. Dumb Data of mobile phone cannot be the basis of protective assessment
Can a figure of Rs.28216 found on a mobile phone during search be construed by guessing it as Rs.28216000 and an addition made u/s 69C as unexplained expenditure? The answer is yes…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 63 | Dated: 20.06.2023
CA Vivek Jalan
In this edition:
1. Income Tax E-Appeals Scheme 2023: JCIT(A) and ADCIT(A) made subordinate to CCIT/DCIT…But superiors should not interfere with decisions of sub-ordinates
The CBDT has rolled out e-Appeals Scheme, 2023, effective from 29-05-2023 vide N No 33/2023. Vide Notification No. 32/2023 dated 29th May 2023, Rule 45 and Form 35 had been amended to be applicable…
2. Attention PSUs: CSR expenses incurred by PSUs allowed u/s 37, incase directed by Govt.
Allowability of CSR expenses under Income Tax keeps on evolving. After the amendment to Section 37(1) from 2015, CSR expenses are disallowed u/s 37(1) of The Income Tax Act…
3. Res-Judicata applicable in Tax Cases also to maintain ‘consistency’
Strictly speaking res judicata does not apply to Income-tax proceedings as each assessment year is treated as a unit and what is decided in one year may not apply in the following year…
4. Tests to determine “Fees for Included Services” in a DTAA w.r.t. an International Transaction
Every service related to the main service for which royalty is received cannot be held to be an Included Service. To determine this relation and pre-dominance of purpose of arrangement…
5. No disallowance u/s 40(a)(ia) for short/wrong deduction of TDS
Incase a person deducts TDS short of the required amount, no doubt he is to be considered as an assessee in default as per provisions of sec. 201 but disallowance of the expenditure is not permissible…
6. RBI Issues Sovereign Gold Bonds : Individuals, HUFs and Trusts can invest
RBI has released The Sovereign Gold Bond (SGB) Scheme 2023-24 (Series I), which will be open for subscription from June 19 to 23, 2023, at Rs. 5,926 per gram. Resident individuals, Hindu Undivided Families…
7. Income derived from Agri Land is agri income and exempt from Income Tax
Income from sale of produce derived from agricultural land has to be treated as agricultural income and as exempt under section 10(1) of the Act. The same has been held by The Hon’ble Andhra Pradesh High Court…
8. Receipt of ‘damages’ invoking a claim for breach is not a Capital Asset and receipt against the same is not liable to Income Tax
Old property cases settle after a hard fought battle. And incase they settle, then arises a question as to whether the consideration received, if any, are taxable under Income Tax or not…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 62 | Dated: 13.06.2023
CA Vivek Jalan
In this edition:
1. Suspicion can trigger seizure where seizure order is after application of mind… Karnataka High Court upholds Sec 37A of FEMA
Tracking down and bringing back the wealth which ultimately belongs to country is the abiding commitment to country. To hold the provisions related to this broad purpose as manifest with arbitrariness…
2. PE for Project/EPC companies based on control over fixed place of business
Project/EPC companies get projects in different Countries. They send their employees and the capital goods from the home countries. The project is completed in the other Country and the employees come back…
3. Compromise Settlements and Technical Write offs policy for wilful defaults
The RBI has pushed the peddle on growth of credit and liquidity in the market. With a focus on expediting closure of settlement proposals under a certain regulatory framework…
4. RBI allows Fintechs to enter into Default Loss Guarantee (DLG) arrangements with a cap
In August 2022, RBI issued digital lending guidelines, which placed restrictions on the practice of DLGs and noted that the same was under examination. Now, The RBI vide RBI/2023-24/41, DOR.CRE.REC.21/21.07.001/2023-24…
5. MSMEs Credit flow further eased.. TReDS gets a push
In a move which may improve cash flow of MSMEs, the RBI expanded the trade receivables discounting system (TReDS) by permitting insurance companies to function as participants…
6. Disallowance of expenditure for Freebies to doctors provided by pharma companies – retrospective; but facts need to be weighed with MCI regulations
Explanation 1 to Sec 37(1) of the Income Tax Act declares that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed…
7. Where the CoA is not ascertainable, then the computation machinery fails
The landmark decision of the Hon’ble Supreme Court in the case of Cit –vs.- B.C. Srinivasa Setty (1981) 128 ITR 294 (SC) is followed in most cases where Cost of Acquisition (CoA) is not ascertainable…
8. When TDS deducted on advance, then credit should also be admissible
Mobilization advance is a capital receipt being in the nature of a loan and there is no legal obligation to deduct tax at source. However, the question is that incase TDS is deducted, can the Credit be availed…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 61 | Dated: 06.06.2023
CA Vivek Jalan
In this edition:
1. Angel Tax: Valuation method u/r 11UA adopted by assessee is final
Section 56(2)(viib) and Rule 11UA of The Income Tax Law providing for various methods of determining the fair value of shares has been much deliberated post budget 2023…
2. E-Appeal Scheme for Appeal to JCIT(A) notified
In view of the pile up of cases at the CIT(A) stage, the Finance Act 2023 had inserted a new section 246 in Chapter XX with effect from 01- 04-2023 for filing of appeal before the Joint Commissioner of Income-tax (Appeals)…
3. Not all Cesses are disallowed even after Finance Act 2022
Vide Finance Act 2022 Explanation 3 has been inserted retrospectively in Section 40(a)(iii) of the Income Tax Act to clarify that for the purposes of the sub-clause, the term “tax” includes and shall be deemed…
4. Burden of proving PE in India is initially on the Revenue
Where an event itself does not happen in India, then payment to a Non-resident for non-happening of such an event in India cannot be considered to have been attributable towards any operations in India…
5. Monetary limits for the Income-tax officers to accept/reject requests u/s 119 revised
The CBDT vide Circular 9/2015, dated 09-06-2015, issued instructions to deal with the applications for condonation of delay in filing returns claiming refund and returns claiming to carry forward of loss…
6. Depreciation on software
Many a times it is contested whether the depreciation rate on software will be 25% as applicable to intangible asset or 60% as applicable to computer. The matter has been settled in many cases…
Direct Tax Vista – Your Weekly Direct Tax Recap + ITAT Order + CBDT Notification + RBI Report
Edn. 60 | Dated: 30.05.2023
CA Vivek Jalan
In this edition:
1. Angel Tax exemptions notified
Vide Notification No. 29/2023 dated 24th May, three categories of entities are notified to have been retrospectively exempted from Sec 56(viib) since 1st April 2023. These are those entities which are registered with Sebi…
2. Leave Encashment bonanza for retiring/ resigning/ super-annuating employees
The Union Budget 2023 did not have anything for those in the old regime in Income Tax. However, there is good news from CBDT for those retiring/ leaving job/ taking super-annuation…
3. Some relaxations for trusts after all
Provisions related to Trusts/NPOs/Charitable Institutions are the subject matter of constant changes over the past 3 years. The CBDT is bent on streamlining the Income Tax issues relating to trusts which are long pending…
4. Expenditure for re-export on grounds of commercial expediency are business expenses
An expenses incurred to rectify a violation under any other law, provided it is for business purpose cannot be disallowed u/s 37(1). What can be disallowed u/s 37(1) is the expenditure incurred by an assessee…
5. Vendor due diligence required for Income Tax also
Under GST, it is contended by recipients that they should not be held liable incase suppliers are defaulting payment of GST to the Govt. This has been an area of widespread litigation under the Indirect Taxes regimes…
6. Income Tax Compulsory scrutiny notices to start flowing now as guidelines are in place
Notices u/s 143(2) will be served for all the cases selected for Compulsory Scrutiny, by 30.06.2023 as the Guidelines for compulsory selection of returns for Complete Scrutiny during the Financial Year 2023-24…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 59 | Dated: 23.05.2023
CA Vivek Jalan
In this edition:
1. TDS on online gaming from 1st April 2023. CBDT issues clarifications and machinery provisions
The battle for taxability of online gaming under GST may have been initially won by taxpayers in the Delhi High Court against the DGGI; however online gaming business remains on the radar of CBIC as well as the CBDT; And the CBDT seems to…
2. Relaxations for start-ups from “Angel Tax”
Extension of “Angel Tax” was a set-back of sorts for start Ups. Section 56(2)(viib) required that where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any resident, any…
3. TCS on LRS continues to face questions and resistance… CBDT continues to evolve this aspect or roll back little
In order to apply TCS on foreign remittances and foreign spends under LRS, an amendment applicable from 1st July 2023 is made in Section 206C(1G) of the Income Tax Act wherein TCS @20% is leviable on remittances for foreign spends…
4. Apex Court lays down principles of what is a “valuable article” as per Sec 69A
Way back, a scam was reported in the West Bengal media. The scam consisted of transporters of bitumen, lifted from oil companies, misappropriating the bitumen and not delivering the quantity lifted to the various Divisions of the Road…
5. Reimbursement of Cost of Expenses for AE is not Business receipt. However even a free service maybe a Transaction International requiring benchmarking
Many times Associates send employees to their group companies and recover the cost of travel, salary costs and other actual costs from the AEs. This is also routed through an ‘advance ledger’ or similar other ledger and is not at all considered as a…
6. TDS u/s 195 only if Income is taxable in India
Section 40(a)(i) of the Income Tax Act ensures effective compliance of section 195 of the Act relating to tax deduction at source in respect of payments made outside India in respect of Royalties, Fees for Technical Services or other sums chargeable…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 58 | Dated: 16.05.2023
CA Vivek Jalan
In this edition:
1. PMLA further tightens the noose covering further activities carried out on behalf of business or profession
Vide Notification S.O. 2135(E) dated 08/05/23, The Ministry of Finance has notified an amendment to Section 2(1)(sa) of the Prevention of Money Laundering Act, 2002 (PMLA)…
2. Complete transition from LIBOR from 1st July 2023 – Opportunity for consulting firms
The use of LIBOR was called into question following the global financial crisis. The RBI had issued an advisory on ‘Roadmap for LIBOR Transition’ in July 2021 wherein banks/FIs, inter-alia, were encouraged to undertake transactions…
3. Subscription Fees for accessing standard online market research database is not Royalty
There are many online databases which set out the details of the modules that are required by the Customers and permitted to be accessed with applicable fees. For making these databases data is collected…
4. Tax Limits for Dept. to file appeals before ITAT/High Court/ Supreme Court
As per CBDT’s Circular No.17/2019, The department cannot file appeals before the ITAT/High Court/ Supreme Court incase the tax impact (except interest and penalty) of disputed issues exceed the following limits…
5. A difference of opinion cannot lead to invocation of penalty u/s 271(1)(c)
The invocation of Sec 271(1)(c) of The Income Tax Act has the following pre-requisites – 1. The officer must record his satisfaction in the notice invoking the said Section…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 57 | Dated: 09.05.2023
CA Vivek Jalan
In this edition:
1. Practicing CA/CS/CMAs under the scanner with new amendment in PMLA
The biggest development of the week is Notification No. S.O. 2036(E), dated 03.05.2023 amending Section 2 of the Prevention of Money Laundering Act (PMLA)…
2. FATCA reportable accounts may use TINs/specified Codes for calendar year 2022 (due by September 30, 2023)
CBDT has issued guidance for the Indian Reporting Financial Institutions (RFIs) to follow in respect of reporting of U.S. reportable accounts vide F. No. 500/107/2015-FT&TR-III…
3. Cross-border wire transfers shall be accompanied by accurate, complete, and meaningful originator and beneficiary information
The RBI Vide RBI/2023-24/25 has instructed banks and financial institutions to ensure that cross-border as well as domestic wire transfers contain complete information about the originator and beneficiary…
4. Disallowance u/s 36(1)(va) applicable to PF/ESIC but not to NPS
In recent times any news related to Adani generates interest. This time, in Income Tax the group is in news for a reason which will generate the interest of businesses which have been suffering post the judgement of The Apex Court…
5. Penalty notice u/s 271(1)(c) is distinct from the assessment
The assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other, nor can each cure the other’s defect…
GLOBAL MINIMUM TAX SERIES: 7 – Rules on Corporate Restructurings and Holding Structures
Edn. 07
CA Amit Jalan
In this edition:
Detail on special rules that deal with corporate restructurings (including mergers, acquisitions, and demergers) and covered in detail Article 6.2 relating to the rules that apply when a Constituent Entity enters or leaves an MNE Group during the Fiscal Year.
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 56 | Dated: 03.05.2023
CA Vivek Jalan
In this edition:
1. Asian Countries Tax Data Exchange Treaty gains further ground
Data exchange is not only happening within India, but also globally now and it is increasingly gaining strength as Trade goes global. All 22 Asian members of the Global Forum on Transparency and…
2. Determining the ‘basis’ of share of revenue in a contracting state
There is always a question on what is the reasonable basis to determine the share of revenue of a contracting state. Lets understand the issue and the matter of law…
3. In an ‘unabated assessment order’, no addition u/s 153A can be made unless there is some incriminating material w.r.t. the addition made by the AO
The provisions of sec.153A of the Act provide for issuing of notice u/s 153A of the Act for 6 assessment years immediately preceding the year of search and thereafter, the AO shall assess or reassess the total income for the above said 6 years…
4. Exemption to trusts u/s 12A to continue on the basis of doctrine of ‘consistency’
Incase the Income Tax Act in the year of Registration did not mandate the requirement of issuance of a registration certificate, the same cannot be insisted upon and the application of registration itself should be considered to be due…
5. AO cannot accept the assessee’s method of accounting on the one hand and determine the value of stock on another method – ‘hybrid accounting method’ cannot be used
AOs can sometimes ask the work contractors to recast their Financial statement relying upon “project completion method” instead of “percentage completion method” or vice-versa. However they cannot use a ‘hybrid accounting method’…
6. “MESNE Profits” for capital asset is capital receipt
‘Mesne Profits’ is defined under section 2(12) of Code of Civil Procedure 1908. It takes within its scope any receipt against wrongful possession of property. The question is whether these receipts are capital receipts or revenue receipts…
GLOBAL MINIMUM TAX SERIES: 6 – Rules on Corporate Restructurings and Holding Structures
Edn. 06
CA Amit Jalan
In this edition:
Special rules that deal with corporate restructurings (including mergers, acquisitions, and demergers) and covered in detail Article 6.1 relating to application of Consolidated Revenue Threshold to Group Mergers and Demergers.
6 – Rules on Corporate Restructurings and Holding Structures
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 55 | Dated: 25.04.2023.
CA Vivek Jalan
In this edition:
1. Transfer Pricing Cases can be taken up by High Court when it can be proved that a matter of fact gives rise to a question of law
ALP determination is an art and not a science. Transfer Pricing exercise is a valuation exercise. The question thus arises whether a Transfer Pricing case can be referred to the High Court……
2. Orders/Notices without DIN are liable to be quashed
Circular No. 19/2019 holds that no communication shall be issued by any income- tax authority unless a computer-generated DIN has been allotted and is duly quoted in the body or such communication……
3. Whether GST ITC balance can be added to Closing stock?
Many a times, a confusion is there in the minds of the AOs whether the ITC/CENVAT Balance at the year-end shall be added to the closing stock u/s 145A as unutilized balance of taxes……..
4. Interest on delayed payment of TDS/Income Tax/GST/Customs/Service Tax/Central Excise/Sales Tax – Allowed as a deduction?
It is now a settled principle that the payment of interest takes colour from the nature of the levy with reference to which such interest is paid. Incase interest is paid under Section 201(1A) of the IT Act……
5. For a Project Company, Director’s salary is a revenue expenditure and not a capital Expenditure
When a project is in process, the AOs contention is that the director’s is the epic centre of all the construction and development activities carried out by the assessee…….
6. Forex Fluctuation loss on account of loan taken for purchase of a capital asset is to be capitalized
Incase Machinery is imported with a loan obtained from foreign banks and which is repayable in foreign currency, the increased liability on account of fluctuation in the rate of foreign exchange…….
GLOBAL MINIMUM TAX SERIES – Guidance on Deemed Consolidation test in the GloBE Rules
Edn. 05
CA Amit Jalan
In this edition:
Special rules that deal with corporate restructurings (including mergers, acquisitions, and demergers) as well as Articles that address the application of the GloBE Rules to certain holding structures such as JV investments and Multi-Parented MNE Groups.
5-Rules on Corporate Restructurings and Holding Structures 20230421
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 54 | Dated: 18.04.2023
CA Vivek Jalan
In this edition:
1. Test for treating Export Incentives/ State Incentive as being “derived from” the business of an undertaking or not
As per Sections 28(iiid) and (iiie) any profit on the transfer of the Duty Drawback and on transfer of DEPB Schemes, etc., shall be chargeable to income tax under the head “Profits and gains of business or profession”…
2. Circulars adverse to The IT Dept. are also binding on officers
A circular can be adverse to the Income Tax Department, but still are binding on the authorities of the IT Department, but cannot be binding on the assessee if they are adverse to the assessee…
3. No Capital Gains on Agricultural Land u/s 2(14) even incase the land is not used for earning agricultural income and is sold after purchasing
Section 2(14)(iii) of The Income tax Act provides that “Agricultural Land” would not be considered as a capital asset and states as under – “.. (iii) agricultural land in India, not being land situated-…
4. Benefit of tolerance limit of +/- 5% as contained in Section 92C(2) available even when one comparable remains in comparable set
Section 92C(2) of Income Tax Act states as follows – “92C(2) The most appropriate method referred to in sub-section (1) shall be applied, for determination of arm’s length price…
GLOBAL MINIMUM TAX SERIES – Guidance on Deemed Consolidation test in the GloBE Rules
Edn. 04
CA Amit Jalan
In this edition:
The guidance issued in relation to the deemed consolidation test under GloBE Rules requires the preparation of a set of Consolidated Financial Statements based on an Authorized Financial Accounting Standard in the Ultimate Parent Entity’s (“UPE”) location………………
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 53 | Dated: 11.04.2023
CA Vivek Jalan
In this edition:
1. Every payment pursuant to a Court’s decree cannot be disallowed u/s 37
It is the right of every business to protect itself from financial liability. The mere fact that the result of going to a court is negative cannot make the payment towards a decree as being in violation of a law…
2. AOs cannot make ad-hoc additions without going into details…Assesses also cannot claim expenses without showing commercial expediency. However, AOs thereafter cannot question pure business decisions
Umpteen no. of times during assessments it is seen that AOs have made additions by disallowing purchases and the same is accepted by assesses. However, it is a good development that even SME businesses…
3. There is no transfer of stock-in-trade by landowner in the case of a JDA
In the case of land development agreement, the agreement in most cases is that after the construction of the housing complex on the said land, a percentage of the constructed area…
4. Employers to take declarations in April 2023 from employees whether they wish to enter into New Scheme/Old Scheme
A lot has already been discussed and deliberated in last 2 months on whether employees should opt for new scheme or old scheme of taxation. Now its action time for employers who have to start deduction TDS…
GLOBAL MINIMUM TAX SERIES – Guidance on Rebasing monetary thresholds in the Globe Rules
Edn. 02
CA Amit Jalan
In this edition:
1. The GloBE Rules contain several monetary thresholds expressed in Euros (EUR)
2. To ensure consistency in the monetary thresholds used by different jurisdictions including those that are expressed in non-EUR currency, the Administrative Guidance provides for an annual rebasing of the non-EUR denominated thresholds based on:
3. The Administrative Guidance also provides that the foreign exchange rate for each individual year for the purposes of determining the relevant threshold translated into local currency will be based on the average foreign exchange rate for December of the calendar year immediately preceding the calendar year in which such Fiscal Year starts and not a single foreign exchange rate applied for the purposes of all the relevant Fiscal Years.
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 52 | Dated: 04.04.2023
CA Vivek Jalan
In this edition:
1. New Foreign Trade Policy 2023 – Salient features
The New FTP is out after a gap of Eight years; three years after its initial end date. The most important and favourable Policy change is that the FTP is now dynamic and Industry can keep on suggesting and with dialogue with the CI Ministry…
2. CBDT eases doing business for Non-Residents and foreigners vide APAs and digitization of Form 15C and 15D
The CBDT has entered into records no. of APAs and digitized Form 15C and 15D, thus sending out message to Non Residents and foreigners that it wishes to usher an era of tax certainty and ease of doing business in India…
3. Finance Act 2023 notified
The Central Government has notified the Finance Act, 2023 as the Parliament has approved the amended Finance Bill, 2023 applicable with effect from 1st April. A total of around 125 amendments are proposed to the Income Tax Act, 1961…
4. No TDS on payments made to ‘advertising agencies’ for procuring and canvassing for advertisements
The issue of applicability of TDS provisions on payments made by television channels or media houses publishing newspapers or magazines to advertising agencies for procuring and canvassing for advertisements…
5. Unlinked PAN Cards would stop functioning from 1st July 2023
Every person who has been allotted a PAN as of 1st July 2017 and is eligible to obtain an Aadhaar Number, is required to intimate his Aadhaar to the prescribed authority…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 51 | Dated: 28.03.2023
CA Vivek Jalan
In this edition:
1. Sheen of Debt Mutual Funds vis-à-vis fixed assets now no more
From April 1, 2023 Debt Mutual fund schemes will be taxed at Income tax rates applicable to an Individuals Income tax slab. Section 50AA has been introduced to include specified mutual fund with not more than 35%…
2. Marginal Relief for assesses under the New Scheme for income between Rs.7 Lakhs and Rs.7.25 Lakhs
It has been proposed to provide marginal relief for taxpayers adopting new tax regime and having income exceeding Rs 7.00 lakhs. It had proposed to insert a proviso to Section 87A to allow a higher rebate…
3. Tax on Royalty / FTS rate under section 115A increases to 20% from 10%
The royalty or fee for technical services earned by a non-resident or a foreign company, not connected to PE or a fixed place in India, shall be charged to tax on a gross basis (without deduction for any expenditure)…
4. TDS on winnings from online games preponed
The Finance Bill 2023 (Lok Sabha) has revised the effective date from which TDS on winnings from online games will be deducted. The amendment was made at the time of passing of Finance Bill, 2023 from Lok Sabha today…
5. TCS on LRS also on remittance within India and on Credit Card payments
Sub-section (1G) of Section 206C requires tax collection on foreign remittances made under the Liberalised Remittance Scheme (LRS) and on the sale of Overseas Tour Program Packages…
6. TCS rate in absence of PAN and for non-filers restricted to 20%
Under section 206CC, in absence of PAN, TCS is collectible at rate of 5% or twice the rate specified in the relevant provision. It has been proposed to restrict the higher rate of TCS collectible at 20%…
7. Changes to incentivize IFSC
No surcharge and cess on income earned by GIFT Category III from securities under section 115A(1)(a); Provision for tax neutral reallocation of any investment vehicle in which ADIA is sole direct or indirect shareholder…
8. Changes in relation InvITs / REITs (“Business Trust”)
SPV not required to withhold on payment of interest on debentures; Exemption to sovereign wealth funds / pension funds for debt repayment from Business Trust introduced [section (10(23FE)];…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 49 | Dated: 14.03.2023
CA Vivek Jalan
In this edition:
1. PMLA Act and Maintenance of records become more stringent
The Ministry of Finance has notified an amendment in Prevention of Money-Laundering Act, 2002. The amendment aims to expand the scope of the Act to cover a wide range of cryptocurrency or virtual digital assets (VDA)…
2. Draft Order is a mandatory Procedure u/s 144C for variation in original order
There has been a rise in the number of cases in the recent past wherein AOs have passed the final order without first issuing a draft order and more so in the new environment of faceless assessments…
3. Interest u/s 36(1)(iii) allowed as deduction even for purchase of Capital Asset
Section 36(1)(iii) of The IT Act provides as under- (iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession: Provided that any amount of the interest paid…
4. No case u/s 68 for shares held for very long periods
In cases of penny stocks the holding period of the shares is generally from 1 to 2 years and that too depending upon the price movement of the stock. An investor will not wait for more 15-20 years to get his black money converted…
5. Commission income for providing ‘bogus entries’ fixed at 0.5%
During the course of a proceeding the AO noticed that the Assessee was engaged in providing bogus accommodation entries in lieu of commission of 1-1.5% by providing entry through various shell companies…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 48 | Dated: 08.03.2023
CA Vivek Jalan
In this edition:
1. The AOs should take responsibility of Sec 154 cases so that these do not meet unfavourable judgements at the appellate stage
The legal contours of an error apparent on the face of the record cannot be exactly identified, but there has to be an application of mind by the AO while invoking Section 154, when a Revenue Audit objection is accepted by the department. Question is that what are “records” and what are…
2. TNM Method not appropriate in determining ALP in capital goods purchase transaction
Transfer pricing provisions kick in only when an income is charged to tax under other provisions of the IT Act. In the case of Vodafone India Services (P.) Ltd. V. UOI…
3. The Court may throw a meritorious case for latches if filing is an afterthought
In the case of Shiksha Foundation Vs DCIT CPC, Bangalore, The question of law framed is that incase the assessee acts on behalf of the professional advice, can he be held guilty for defiance of any provision of law…
4. Section 68 for unexplained credit before and after amendment by FA 2022
Section 68 of the Act provides that where any sum is found to be credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him…
5. Where unexplained income cannot be entangled in the clutches of The Section 69 family
Sections 68, 69, 69A, 69B, 69C and 69D may be called as Section 68 & 69 Family. However, they differ in as far as Burden of Proof is concerned. In sec 68, the onus is wholly upon the Assessee to explain the source of the entry. But in cases falling…
6. IT Dept issues Instructions on dissemination of High-Risk transaction and High-Risk Non-PAN Transaction cases on Verification module of Insight portal
The Directorate of Income Tax (Systems) has issued Instructions vide F. No. DGIT(S)-ADG(S)-2 / High Risk Transaction (Pan and Non-PAN) cases/2022-23/11914 dated February 20, 2023 regarding the dissemination of High-Risk…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 45 | Dated: 14.02.2023
CA Vivek Jalan
In this edition:
1. Battle on Freebies to doctors before AY 2010-11: ‘Reason’ is the link between ‘conclusion’ and ‘evidence’ for reopening assessment; Law applicable in relevant AY to be applied only
While re-opening assessments, the reasons recorded should be clear and unambiguous and should not suffer from any vagueness. Reasons provide the link between evidence and conclusion…
2. Any ad-hoc determination of ALP by TPO de-hors Section 92C(1) of the Act cannot be sustained
Section 92C(1) of the Act, contemplates that the arms length price in relation to an international transaction shall be determined by comparable uncontrolled price method; resale price method; cost plus method; profit split method…
3. The Court may relax latches incase a professional misleads
The Doctrine of Laches emanates from the principle that the Courts will not help people who sleep over their rights and helps only those who are aware and vigilant about their rights…
4. Allowability of write off of CWIP expenses
A classic case followed by revenue where the question of law is regarding Allowability of write off of CWIP expenses is M/S. FAURECIA EMISSIONS CONTROL TECHNOLOGIES INDIA PRIVATE LTD. VERSUS DEPUTY COMMISSIONER OF INCOME TAX…
5. Section 206AA of the Act cannot have overriding effect on DTAA: TDS on payment made to NRI who did not furnish PAN can be made as per rate in DTAA
The issue is that in case of payments made by the assessee to non-residents, whether in the absence of PAN of the non-resident payees, the assessee is permitted to deduct taxes at the rate mentioned in the Tax Treaty…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 42 | Dated: 24.01.2023
CA Vivek Jalan
In this edition:
1. Global Minimum Tax to result in gains of 9% of Global Tax Revenues
To usher in a Tax mammoth tax reform, among all other considerations, the most important consideration is that it should lead to a gain which is worth the pains to implement it. Infact the machinery involved in the process have…
2. Applications of the theory that ‘Real Income’ is only liable to be taxed.
Even under the mercantile system, in order to put an income to tax, the same must become actually due no matter when it is received and that income cannot be said to have accrued to an assessee-company if it is based on a mere claim not backed…
3. Allowability of demurrage and wharfage expenses
Demurrage is paid to the Railways for not lifting the goods consigned to it in time to compensate it for keeping the goods of the assessed in its custody beyond a particular time. Similarly, the port authorities charge demurrage for delay in clearing…
4. Interest on delayed Income Tax/TDS/GST/any statutory payment: when allowed as a deduction
In claiming the deduction u/s. 37(1) for interest u/s. 201(1A), an issue arises as to whether such interest can be considered to be incurred wholly and exclusively for the purpose of business or profession. The issue is relevant for a large number of…
5. Cash payment to directors in violation of Section 40A(3) allowed
The intention behind introduction of provisions of section 40A(3) of the Act was two-fold…
6. Is CSR Expenditure allowable u/s 80G?
In the recent past a litigated issue is “Donations given towards CSR Expenses and its allowability as deduction U/s 80G”. The question whether contributions made under CSR are eligible for deduction u/s 80G of Income tax 1961 or not, is…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 41 | Dated: 17.01.2023
CA Vivek Jalan
In this edition:
1. Is Class Legislation possible in Taxation?
The Rule of Law cannot prevent a certain class of persons from being subject to special laws. The State has the power to make laws operating differently on different classes of people, in a way that the…
2. Satisfaction of “Make Available” Clause in “Cross Charge” of Managerial Expenses
Again and again the AOs dispute on Taxation of “Fees for Technical Services” and again and again the Courts keep on quashing demands on “Make Available” Clause. Now let us understand the ‘make available’ test on cross charge of managerial…
3. Expenses on Construction of Roads are Revenue in Nature
We have earlier dwelt with the debate on Revenue Expenditure Vs Capital Expenditure in detail. This time we will dwell on a specific expenditure which is generally needed to be incurred by almost all factories, warehouses…
4. How to prepare for Share Capital/Premium disputes
Incase of share capital / premiums addition, there is an obligation on the part of the assessee to prove three ingredients of the person from where the money is actually…
5. Allowability of ESOPs expenditure and preparation for its assessment
ESOPs are used by various companies as a measure to retain employees. The difference of value on a reporting date and the cost to the employee is debited to…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 40 | Dated: 10.01.2023
CA Vivek Jalan
In this edition:
1. TDS on year end provisions…When applicable, when not
The question which has arisen many a times is that how TDS Provisions can be applied where Payee is not known as TDS is deducted and deposited in payee’s name? At the year-end on accrual
2. No penalty for violation of 269SS when Test of Reasonable Cause is passed
Sec 273B provides that no penalty shall be imposable on an assessee, for a failure if he proves that there was reasonable cause for the said failure. Hence, while accepting Loans through Journal Entries would be a violation of Sec 269SS, yet
3. Payment/Refund of tax may keep the interest meter ticking
We have reported earlier that many a times, a question arises during business operations whether to stop the interest burden from accruing by making a payment of tax, even under dispute. Would it be a wise decision that the tax amount be paid
4. Certificates would be valid proof for claim of TDs even in absence of entry in Form 26AS
To ease compliance burden on the Tax Deductors, Industry bodies have approached the Ministry of Finance to dispense off with the requirement of issuance of TDS Certificate and reply on only Form 26AS. However these TDS Certificates act as a
5. FDI Compliance Rationalised of Reporting in Single Master Form (SMF) on FIRMS Portal
Various information is required to be filed with RBI to inform about FDI. RBI has taken all necessary steps to keep reporting simplified and sorted. Therefore, various changes have been made in the reporting requirement of FDI
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 39 | Dated: 03.01.2023
CA Vivek Jalan
In this edition:
1. Cash received on various days to be not considered as “in relation to one event or occasion”
Section 269ST(c) provides that no person is allowed to receive a sum of Rs. 2,00,000 or more, from a person “in relation to one event or occasion”, in cash or an impermissible mode…
2. Demonetization declared legal
The Constitutionally Valid of Demonetization was upheld by The Apex Court in the case Vivek Narayan Sharma vs. Union of India (2023) (SC). Herein, the Constitutional validity of RBI Notification No. 3407(E) dt.08.11.2016…
3. Non-routine product promotion expenses cannot be considered as Service applying ‘Bright Line Test’
Transfer Pricing Litigation concerning Advertising marketing and sales promotion (AMP Expenses) and creation of Marketing Intangibles for the Foreign Associated Enterprise, has come to the fore in recent years…
4. DTAA would prevail over Section 206AA …even before the amendment
Finance Act 2016 has liberalized the provisions of S.206AA by inserting S.206AA(7)(ii) which provides that s.206AA shall not apply to payments to non-residents subject to conditions as may be prescribed…
5. Percentage Completion Method for Undisclosed Cash Receipts!
Is an Excel sheet found during search, corroborative evidence? Is a figure mentioned in such sheet reliable? Whether undated and unsigned details can be considered as ‘evidence’ on the basis of which tax can be levied?…
6. Forward Loss for Hedging allowable as expenditure
Can the loss on Forward Cover Purchase Contracts for foreign exchange be allowed as a deduction from the income chargeable to tax notwithstanding that the Forward Contracts have not closed?…
7. Payment pursuant to arbitration award is business expenditure
Explanation 1 to section 37 (1) of the Act reads that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 38 | Dated: 27.12.2022
CA Vivek Jalan
In this edition:
1. Global Minimum Tax & BEPS – Work in fast track
A year after the international community reached a landmark agreement on a two-pillar solution to reform the international tax rules…
2. Entries reflected in GSTR-2A lead to Income Tax Demands
We have witnessed various disputes under GST on account of GSTR2A Vs GSTR 3B mismatches wherein the ITC claimed in GSTR 3B does not appear in GSTR 2A…
3. Interior work in Rented Premises is Revenue Expenditure
We have discussed the tests to classify a particular expenditure as Capital or Revenue Expenditure in DTV Edn 36 as follows…
4. Payments more than 20K per day allowed even other than circumstances as per Rule 6DD
In some businesses, it is a practise that the suppliers insist on cash payment before delivery of the product and the payment is thus made as business cannot continue disregarding the said practise…
5. Is retention money taxable on accrual basis or receipt basis?
The question is whether the retention money has to offered for tax in the year in which it accrues and finds a place in Form 26AS and also shown the ledger account of the customer…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 37 | Dated: 20.12.2022
CA Vivek Jalan
In this edition:
1. A Ray of Hope for assesses incase of delayed payment of PF & ESIC
We discussed in our DTV Edn: 28 how The Hon’ble Apex Court checkmated the business houses which deduct provident fund and ESIC contribution from the salary of employees and then deposit to the authorities…
2. Assessees should not be punished for their bona fide mistakes or errors as ITR form is highly complicated
For Taxpayers and Tax Authorities, by far the most important Article of The Constitution is Article 265 which requires that no tax shall be levied or collected except by the authority of law…
3. Direct & Indirect Collections estimated to beat budget Estimates. Taxpayers to take note of effective use of technology by the MoF
The net direct tax collections so far this financial year are at ?7L Crore, an increase of 23% as compared to the same period of the corresponding financial year…
4. Interest on NPAs should be taxed on receipt basis. No point adding interest on NPAs first and then claiming as bad debts
Can a part of the books of account be on cash basis and a part on accrual basis. When a non-scheduled bank draws up its books on accrual basis, then can it recognize the interest on NPAs…
5. Depreciation expenses is allowed as deduction to a Charitable Organisation before amendment of Act, Manual Revised return to be considered
Charitable trusts or institutions are governed by the provisions of sections 11, 12, 12A, 12AA and 13 under Chapter III of the Income-tax Act. These sections constitute a complete code…
6. Are ‘Outstanding Receivables’ an International Transaction?
In our DTV Edn: 32 we discussed the decision of M/s INTEGRA SOFTWARE SERVICES P LTD Vs DCIT [2022-VIL-1433-ITAT-CHE]. It was held that Incase of a delay in realization of receivables from AE as well as Non-AEs…
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 36 | Dated: 13.12.2022
CA Vivek Jalan
In this edition:
1.BEPS: Under India’s Leadership G20 and OECD takes step to finalise Amount “B” of Pillar One
2.Faceless Assessment E-Portal Closed without Notice… Steps ahead
3.Form 67 is directory and not mandatory to claim foreign tax credit
4.Indian Olympic Association gets a new President and a favourable decision
5.Can Discounts be considered as a service/benefit liable to TDS u/s 194H?
6.Interest on delayed payment liable to TDS u/s 194A?
7.Revenue Expenditure or Capital Expenditure – The Contest continues
8.Strict Time Limit fixed for AOs for response u/s 245 & u/s 241A
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 34 | Dated: 29.11.2022
CA Vivek Jalan
In this edition:
It’s the start of the Budget Season. It is a season where The Ministry of Finance provides time to Trade, Industry & Professionals to represent before them on issues faced. Taxation issues as always take the centre stage. In this special Bulletin of The Direct Tax Vista for our readers we present the ‘asks’ from Trade & Industry in Income Tax and International Taxation. Incase readers have other issues too, they may please write to us for presenting before the concerned authorities:
1. Reducing Compliance burden by making the process of application for Lower/NIL TDS Certificates u/s 197 of The Act – every 5 years instead of yearly
2. Foreign tax credit (FTC) u/s 90 of the Act
3. Disallowance of expenses relating to exempt income under section 14A of the Act
4. Tax Deduction at Source under section 194R of the Act and Section 28(iv) of Income from Business/Profession
5. Requirement to issue and maintain tax deducted at source (‘TDS’) and Tax collected (‘TCS’) certificates
6. Linking of PAN and TAN
7. Disallowance of Expenditure incase payment is not made to Creditors within 180 Days
8. Taxation for Individuals
9. Valuation of Company Owned Accommodation provided to employees under section 17(2) of the Act
10. Taxing of Employee Stock Options (“ESOPs”) in the hands of the employees
11. Rationalization of tax rate for income of dividend earned by residents
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 33 | Dated: 22.11.2022
CA Vivek Jalan
In this edition:
1. Lack of control on amounts earned by the deductee cannot form the legal basis for the deductors to avoid their liability to deduct TDS
2. No International Transaction incase of reimbursement of expenses received
3. No International Transaction for Interest on receivables from AEs in some cases
4. Commission Income Deduction u/s 37(1) – When sustainable, when not…
5. RBI paints a gloomy picture of global Economy but hails India
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 32 | Dated: 16.11.2022
CA Vivek Jalan
In this edition:
1. OECD taking Giant Leaps in Global Data Sharing and Exchange of Information
2. Clearer understanding of “Make Available” Clause is needed
3. Credit of TDS should be given in the year in which Income is offered for Taxation
4. Statutory Audit Fees provision and Rent expenses allowed
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 31 | Dated: 08.11.2022
CA Vivek Jalan
In this edition:
1. “One Nation One ITR” – Analysis of New Common ITR Form – The Next Big Reform in Income Tax
2. Employers cannot allow LTC Claim by “circuitous route”
3. Opportunity of Charitable Organisations to migrate into New Scheme till 25th November 2022 by Filing Form 10A
4. 2(15) Case Ratio would apply to future cases also as Revenue Starting to redo the assessments in accordance with the AHMEDABAD URBAN DEVELOPMENT AUTHORITY judgment
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 30 | Dated: 01.11.2022
CA Vivek Jalan
In this edition:
1. TDS Deductor does not deposit the same – Recourse for the deductee?
2. With Second landmark Decision on Charitable Trust, the litigation landscape in this sector may see fresh offshoots
3. Taxing Angadias – Principles for determining the income will remain the same even though the source of income is illegal in nature
4. Income Tax and GST conundrum on Warranties
5. Receipt of termination of Trust is Capital Receipt
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 28 | Dated: 18.10.2022
CA Vivek Jalan
In this edition:
1. Supreme Court Checkmates Businesses who will not be allowed deduction w.r.t. employees contribution even incase there is a single day of delay
2. Denial of exemption to trusts for participation in fairs ‘outside India’ – Is it application of income outside India
3. Proper Inquiry should be one by TPO to indicate that ‘receivables’ reflect in a benefit to the AE
4. U/s 194R Discount is a ‘Benefit’ and u/s 194H discount is a ‘commission’
5. Equalization Levy intention is to target audience in India
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 26 | Dated: 04.10.2022
CA Vivek Jalan
In this edition:
1. Application for re-computation of income for ‘Surcharge deduction’ taken earlier
2. Exemption u/s 11 cannot be denied to surplus generated from activity sub-servient to the main object
3. Conundrum of Netting of Expenses with Income
4. LSF options available across
5. Interest on enhanced compensation is not ‘income from other sources’ but a capital receipt
6. RBI Reports show a rosy picture… in contrast to ground realities
7. Interest paid out of interest earned is allowable as a deduction
Edn. 24 | Dated: 20.09.2022
CA Vivek Jalan
In this edition
1. Effort to decriminalize Income Tax Laws – A Balm for taxpayers!
2. CBDT gives “benefit” to taxpayers by issuing Circular 18 of 2022 for TDS u/s 194R! Taxpayers need more!
3. NRIs can now directly make payments for bills on behalf of their families from abroad
4. Liaison office shall not be considered PE incase it is compliant with the RBI guidelines
5. How to prove a claim for ‘Bad Debt’
6. Shares of Holding Company granted as ESOP is an allowable claim u/s.37(1)
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 23 | Dated: 13.09.2022
CA Vivek Jalan
In this edition:
1. Indian growth story continues – GST numbers also reflect on Income Tax numbers
2. OECD releases a practical guide to assist tax administrations in designing and carrying out tax capacity building programmes for developing countries
3. Puja Donation is business expenditure
4. Group Companies may work as ‘commissionaires’ of Holding Company which would remain the ‘service providing party’
5. Business expansion expenditure is Revenue in nature
6. Merely because the liability is barred by limitation, it does not cease to be a debt
7. Revised Return post 143(1) has to be accepted
8. RBI assigns Risk Weights for Exposures guaranteed by Credit Guarantee Schemes (CGS)
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 22 | Dated: 06.09.2022
CA Vivek Jalan
In this edition:
1. Powers of the ED for search & seizure under PMLA
2. Doctrine of unjust enrichment applies even to the Revenue Authorities; Filing of ITR is a ‘deemed intimation’ incase ITR is not processed in time
3. RBI’s digital lending norms and data privacy concerns
4. The assessment made u/s 153A would only be made on the basis of seized material even though Section 153A does not say so specifically.
5. The delivery of a service via technological means does not make the service technical
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 21 | Dated: 30.08.2022
CA Vivek Jalan
In this edition:
1. Deduction of writing off of an advance is available only incase write off is “on sound and reasonable basis”
2. Merely because an expense results in enduring benefit would not make it capital in nature
3. Penalty cannot be imposed without mentioning the specific charge/guilt
4. ‘Interest’ paid by assessee to the Dept. is a ‘debt’ in the hands of the department. Hence Interest on this debt needs to be paid and it cannot be coloured as ‘interest on interest’
5. Substantive law, no retrospective application
6. Big Changes made by RBI in Overseas Investment Rules and Regulations
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 20 | Dated: 23.08.2022
CA Vivek Jalan
In this edition:
1. Investigation Units in both Income Tax and GST, Issue Instructions with mandate to field officers for ‘strict compliance’
2. Corporate Guarantee extended to an AE is an “International Transaction”
3. A decision on a debatable point of law is not a mistake apparent from the record and not subject to rectification u/s 154
4. Companies Be Alert! In addition to Income Tax & GST – Now ROC to Physically verify premises also
5. CBDT amends rule 128 and relaxes conditions for filing of form no. 67 for claiming Foreign Tax Credit vide Notification No. 100/2022-Income Tax
6. RBI clarifies that it is not against privatization of public sector banks
7. Marketing and Corporate Branding Expenditure – Allowable u/s 37
8. Non-residents having no PE in India exempted from section 206C(1G) TCS
9. New IT Rule 40G/ Form 29D for Refund u/s 239A of Incorrect TDS u/s 195
10. Rule 17/ Form 10 amended to allow accumulation of income by S. 10(23C) entities
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 19 | Dated: 16.08.2022
CA Vivek Jalan
In this edition:
1. Statement by a data entry operator is not a ‘reason to believe’ for re-opening
2. Trusts, NGOs, NPOs, Schools/Colleges, Hospitals, etc to start maintaining extensive books of Accounts
3. There cannot be two different yardsticks for the same set of sale transaction made by five co-owners
4. Bilateral Netting of Qualified Financial Contracts – Amendments to Prudential Guidelines
5. If a particular relief is legitimately due to an assessee, the authorities cannot circumscribe it by creating such circumstances leading to its denial
6. Interest on refund mandatory even when it is on “interest deposit”
7. Site Eviction charges would fulfill the test laid down u/s 37(1)
8. Relatives as defined under the Senior Citizens Act is not to be treated at par with ‘relative’ under the Income Tax Act
9. No Personal hearing, no draft assessment along with show cause notice as required under section 144B(1) and section 144B(7): Faceless Assessment Order is invalid.
Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 18 | Dated: 09.08.2022
CA Vivek Jalan
In this edition:
1. Faceless assessment: Fresh SOPs issued to address taxpayers’ conflicts
2. Even NIL Income is disclosure of income
3. Cash payment for ‘business necessities’ cannot be disallowed arbitrarily
4. CBDT issues conditions, forms to get income tax exemption on covid 19 help money
5. No TDS u/s 195 for purchase of software product – There is a clear distinction between “Copyright” and “Copyrighted Article”
6. Transfer Pricing BLT as an approach is not permissible for undertaking any addition on account of AMP expenses
7. Premature redemption under Gold Monetisation Scheme payable only in rupees: RBI
8. 2022-23 looks bright for manufacturers as well as Service Companies as per RBI.