Direct Tax Vista

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…

DTV42

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…

DTV41

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

DTV40

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…

DTV39

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…

DTV38

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…

DTV37

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

 

DTV36

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

 

DTV34

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

 

DTV33

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

DTV32

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

DTV31

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

DTV30

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

DTV28

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

DTV26

Direct Tax Vista – Your Weekly Direct Tax Recap

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)

DTV24

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)

DTV23

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

DTV22

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

DTV21

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

DTV20

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.

 DTV19

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.

DTV18