Direct Tax Vista

Direct Tax Vista – Your Weekly Direct Tax Recap

Edn. 100 | Dated: 29.03.2024

CA Vivek Jalan

In this edition:

1. Changes in the ITR-V and acknowledgement forms on verification of ITR

The CBDT vide Notification dated 27th March 2024 has notified changes in the ITR-V and acknowledgement forms, due to changes made in the Income Tax Act, 1961, as announced in the Budget 2023…

2. Amendment in the Income Tax Act cannot have any effect in interpretation of DTAA… unless the said DTAAs are amended jointly

It is a settled position in law that amendment in the Act cannot have any effect in interpretation of DTAA. A change in executive position cannot bring about a unilateral legislative amendment…

3. The onus is entirely on the Revenue to establish existence of PE every year

The existence or otherwise of PE has to be determined on year to year basis, as the existence of PE has to be decided based on the definition of PE in the relevant tax treaty. Merely because in one year…

4. The powers of inquiry with the AO and CIT(A) are concurrent

The powers vested with CIT(A) under Section 251 are coterminous with that of AO exercising quasi-judicial functions. The CIT(A) is not only the appellate authority but also possess the power of adjudicating authority…

5. Guidelines for AOs for initiating proceedings u/s 147 of I.T. Act, 1961 in e-Verification cases

The Directorate of Income Tax (Systems) has issued e-Verification Instruction No. 2 (i) of 2024, guiding Assessing Officers (AOs) on initiating proceedings under section 147 of the Income Tax Act, 1961…

6. RBI relaxes rule for banks on investment in alternative investment funds

In December 2023, the RBI had restricted banks and NBFCs from investing in AIFs, which have downstream investments in debtor companies. Banks or NBFCs which had investments in AIFs…

 

DTV100

Direct Tax Vista – Your Weekly Direct Tax Recap

Edn. 99 | Dated: 20.03.2024

CA Vivek Jalan

In this edition:

1. Appeal against intimation u/s 143(1) or rectification u/s 154 or both?

Under the scheme of the Income tax Act, the assessee has two remedies against the Intimation u/s 143(1), viz.- (i) file rectification-application u/s 154, or (ii) file appeal u/s 246A…

2. Modified ITR for Business Reorganization from June 2016 to March 2022 possible untilJune 30, 2024… taxpayer to communicate to JAO by30th April 2024

Section 170A was inserted vide the Finance Act, 2022 with effect from April 1, 2022, to make provisions for giving effect to the order of business reorganization issued by a tribunal, court or an Adjudicating Authority…

3. Reporting of numbers within strict timelines: RBI denies extension of cut-off time to agency banks for uploading GST, ICEGATE and TIN 2.0 files

The Government wishes to be spot on in the release of the numbers. We are witnessing the same as GST / Income Tax Collection figures are released almost on a real time basis…

4. Income from sale of scrap, Freight recoveries, Insurance recovery, Rent of ATM installed in factory, Exchange fluctuation gain for payment to creditors are all income from industrial undertaking

Section 80-IB of the Income Tax Act provides for deduction in respect of profits and gains from certain industrial undertakings other than the infrastructure development undertakings…

5. Reimbursement/income from employees is a business income

Employees are often provided various benefits/advantages and these benefits/advantages along with the Cash Component is called “Cost To Company” i.e. CTC. During the course of employment…

6. Can valuation of shares be rejected, if done as per DCF method prescribed u/s 56(2)(viib)… and recalculated by AO

Any businessman or entrepreneur, visualises the business based on certain future projection and undertakes all kind of risks. It is the risk factor alone which gives a higher return to a businessman…

7. The levy of penalty under section 271AAB is not mandatory… However where the conditions as per 271AAB(1) are met, there is no bar too

The levy of penalty under section 271AAB of The Income Tax Act is not mandatory or automatic, same needs to be examined, whether there is any basis for levy of penalty or non-levy thereof…

8. The character of subsidy in hands of recipient (either revenue or capital) will have to be determined by having regard to purpose for which the subsidy is given

A common question is whether subsidy received in form of sales tax incentive Scheme is a capital receipt or a revenue receipt. The short answer to the question can be had In the case of…

9. Income Tax Dept to work on holidays as YoY Collections increase by around 20%

Gross Direct Tax collections for the FY 2023-24 registered a growth of 18.74%; Net Direct Tax collections for the FY 2023-24 have grown at over 19.88%; Advance Tax collections for the FY 2023-24…

DTV99

Direct Tax Vista – Your Weekly Direct Tax Recap

Edn. 98 | Dated: 13.03.2024

CA Vivek Jalan

 

In this edition:

1. Complying with Advance Tax ‘e-campaign’

Through e-campaign, persons/entities carrying out significant financial transactions are being ‘alerted’ through email/SMS to ‘urge’ them to compute and deposit their due advance tax on or before 15.03.2024…

2. Priority/out of turn disposal of appeals by CIT(A) Assessment Units and Additional Joint CIT(Appeals)

A reference from the Prime Minister’s Office or a VIP reference will help an Income Tax Appeal to be taken up on priority or out of turn disposal, CBDT has said in its new guidelines no. F. No. 279/Misc./M-102/2021-ITJ…

3. Further Income Tax Benefit to banks, finance units, brokers, investment advisors, distributors, fintech entities and others in IFSC

The Government of India has issued a notification exempting specific payments made to IFSC Units from Tax Deducted at Source (TDS) under the Income Tax Act, 1961…

4. Waiver Off Late Fees & Interest for Delayed Filing of Form 26QE for Period from July 2022 to Feb. 2023 for TDS u/s 194S… till 30.5.2023

Circular No. 04/2024, issued by the Central Board of Direct Taxes (CBTD) on March 7, 2024, brings a relief for specified persons under section 194S of the Income-tax Act…

5. CBDT clarifies provisions under Finance Act 2023 relating to donations made by a trust / institution to another trust / institution for purposes of application of income

Income of any fund or institution or Trust or any university or other educational institution or any hospital or other medical institution referred to in certain clauses of section 10(23C) of the Income-tax Act, 1961…

6. One time Amnesty… Till31st March 2024…for NGOs/ Trusts who have filed the wrong Form for Audit Report

One of the conditions required to be fulfilled by the trust or institution in order to be eligible to claim exemption, is, that it is required to get its accounts audited and furnish the audit report…

7. RBI issues directions to card networks for issuance of credit card to customers

The RBI has authorized card networks collaborate with banks and non-bank entities for the issuance of credit cards. There are five authorised card networks in India: American Express Banking Corp…

 

DTV98

Direct Tax Vista-Your Weekly Direct Tax Recap
Edn. 97| Dated: 06.03.2024.
CA Vivek Jalan

 

In this edition:

1. Global Minimum Tax: Challenges arising from digitalisation: Release of Amount B report to simplify transfer pricing rules and conforming changes to the Commentary of the OECD Model Tax Convention
OECD/Inclusive Framework released its Final Report on Pillar One – Amount B. OECD expects that this approach will benefit Low-capacity jurisdictions (LCJs) which have limited resources and data availability…

2. AOs instructed to initiate proceedings u/s 147 of I.T. Act, 1961 in e-Verification cases
Re-openings under E-Verification Scheme would start now. E-Verification Instruction No. 2 of 2024 provides a comprehensive guide for Assessing Officers to initiate proceedings under Section 147 of the Income Tax Act, 1961…

3. RBI streamlines process to standardise filing of supervisory returns by banks, NBFCs
As per FEMA Norms, Supervisory returns refer to all periodic/ ad-hoc data submitted to RBI in formats prescribed from time to time. Commercial banks have to file 36 returns, including on “Asset Liability and Off-Balance Sheet Exposures”…

4. ITR-7 notified
The CBDT has notified ITR-7 [For persons including companies required to furnish return under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) only] under section 139 of Income tax Act 1961 for AY 2024-25…

5. Delayed return processing and refund for AY 21-22 addressed
Incase you are a taxpayer who electronically filed your income tax returns for AY 2021-22 with valid refund claims and are encountering processing delays due to technical issues or reasons beyond your control…

6. Customers get more protection under streamlined Bharat Bill Payment System
Bharat Bill Payment System is an integrated bill payment platform which enables payment or collection of bills through multiple channels—mobile apps, mobile banking, physical agents, and bank branches—using various payment modes…

 

DTV97

Direct Tax Vista-Your Weekly Direct Tax Recap
Edn. 96| Dated: 28.02.2024.
CA Vivek Jalan

In this edition:

1. Allowability of Interest on delayed payment of TDS
For claiming an expenditure while determining the taxable income, an assessee should satisfy the twin conditions of allowance of expenditure pursuant to the provisions of Sec.30 to 37 of the Act…

2. Income Tax Online E-Verification Scheme: A chance to explain a transaction and avoid Scrutiny
Taxpayers should be careful in case they receive any SMS or E-Mail from the Income Tax Department. The CBDT has Implemented E-Verification Scheme for Mismatch in Interest Income, Dividend Income…

3. New cards/wallets for payments across various modes of public transport such as metro, buses, rail, waterways, tolls and parking
PPIs are instruments issued by banks/non-banks that facilitate purchase of goods and services, conduct of financial services, enable remittance facilities, etc., against the value stored therein…

4. RBI Implements cabinet decision to Extend the Interest Equalization Scheme for Pre and Post-Shipment Rupee Export Credit Upto June 30, 2024
The Govt. has extended the hugely successful Interest Equalization Scheme for Pre and Post-Shipment Rupee Export Credit Scheme up to June 30, 2024. The Scheme started on April 1, 2015…

5. Information on financial information on Government Securities held by retail investors to be shared
Data Sharing between various agencies and networks is and will be the Governance Model as India transcends its journey upstream in the Global economy. In this regard, an Account Aggregator (AA)…

6. Jewellery seizure and addition under Income Tax: Validity and Limits
There is no limit on holding of gold jewellery or ornaments by anybody provided it is acquired from explained sources of income including inheritance. Legitimate holding of jewellery up to any extent is fully protected…

7. For the fault of the AO, the assessee shall have to suffer through a new scrutiny u/s 263
For the fault of the AO, the assessee shall have to suffer through a new scrutiny u/s 263 is what The Mumbai ITAT held in the case of PLAY GAMES24X7 PVT LTD Vs DY. COMMISSIONER OF INCOME TAX…

8. AO cannot judge whether the services and expenses are required or not
Services are intangible and the quantum and value is based solely upon the judgement of the recipient. Where an assessee gives the details of persons to whom consultancy charges were paid…

 

DTV96

Direct Tax Vista-Your Weekly Direct Tax Recap
Edn. 95| Dated: 21.02.2024.
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. CBDT issues order giving effect to the Budget proposal of remitting petty tax demands
In the Interim Budget 2024-25, The finance minister proposed to withdraw direct tax demands up to INR 25000 pertaining to the period up to tax year 2009-10 and up to INR 10000 for tax years 2010-11 to 2014-15…

2. Salaries of NRIs going for job overseas is not taxable… in the same way as salaries of expats are not taxable in their home countries
The Income Tax Department plays hot and cold at the same time in the matter of Non-Residents moving out of their own countries for being employed in another Country. They wish to tax in India…

3. Plea of defect in notice taken first time in the High Court and not earlier is an empty plea
The adjudicating stage as well as the first and second appeal stage has to be handled effectively in case a matter has to successfully be argued in High Court. Where AO completed assessment under Section 143(3) …

4. Wrong return filed due to exceptional circumstances may be rectified during assessment
The compassionate face of judiciary is also visible in some tax cases. Hence where a businesswoman submits her non-accounting/ taxation background, the Courts do understand the matter…

5. For issuance of Low TDS Certificate, AO cannot see profitability of assesses; But has to rely on 4 principles of Rule 28AA
Rule 28AA of Income Tax Rules for Certificate for deduction at lower rates or no deduction of tax from income other than dividends specifies, interrail as follows – 28AA. (1) Where the Assessing Officer, on an application…

 

DTV95

Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 94 | Dated: 13.02.2024
CA Vivek Jalan

In this edition:

1. TDS Deductors may witness notices on deduction, if the counter-party disagrees

Advance income tax collection through TDS/TCS mechanism has been a top target of the Government, alongwith tracking of the flow of income on goods or services. Over the years we have witnessed the TDS/TCS mechanism…

2. Bogus purchase admitted in GST would result in a liability in Income Tax too… Incase of services, the situation is grimmer

Bogus purchase admitted in GST would result in a liability in Income Tax too. Where the parties are non-existent the GST Authorities would disallow the ITC. However, incase the taxpayer has the supporting documents…

3. No set off for losses for calculating tax as per Section 115B(2)… Only after amendment as per FA 2016

Section 115BBE of Income Tax Act provides for Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D. The income-tax payable here shall be at the rate of sixty per cent…

4. Lease equalization charges are not unascertained liability

The difference between capital recovery and interest or finance income is essential for accounting with reference to the substance over the form. Lease equalization is an essential step in the accounting process to ensure that real income…

5. Date of payment is considered to be the date on which the cheque is delivered, regardless of when the cheque is actually presented for payment

Section 54F being a relief provision, should be viewed in a bit of a relaxed manner. Thus Incase the seller ignores depositing post-dated cheques on due dates, once cheques have been issued, appellant’s liability…

6. Form 67 is directory and not mandatory to claim foreign tax credit

It is high time that necessary amendments should be made in the Income Tax Act/Rules to incorporate the process of claiming the tax credit, where the foreign tax credit certificates are received by an assessee…

7. Incase due to technical reasons there is a difficulty in uploading the e-return, paper return may be considered

Law does not require any person to do an impossible thing. Incase due to technical reasons, there is a difficulty in uploading the e-return and grievance application also goes un-answered and, therefore assessee submits…

8. No contract, No TDS u/s 194C

Not very often do we witness IAS officers and bureaucrats being served with tax notices and orders. But when they are, the case needs to be discussed and hence we are penning down a simple matter of non-deduction of TDS…

9. No TDS u/s 195 on ‘sales commission’ in certain cases

The expression ‘Technical Services’ cannot be construed in a narrow sense, and would not to be confined only to technology relating to engineering, manufacturing or other applied sciences, but also other services…

DTV94

Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 92 | Dated: 24.01.2024
CA Vivek Jalan

In this edition:

1. Accounting/Tax/Law Firms encouraged to operate from GIFT City… Global Accounting Units of foreign Companies may also get a boost

GIFT City of International Financial Services Centre (IFSC) remains high on the Ministry of Finance’s radar… Many companies abroad have opened up their Global Accounting/taxation Centres in India…

2. Powers of the CIT(A), of enhancement under section 251 of Income Tax Act is restricted to the matter dealt with by the AO

Section 251(1)(a) of The Income Tax Act on Powers of the Joint Commissioner (Appeals) or the Commissioner (Appeals) provides that in disposing of an appeal, the Commissioner (Appeals) shall have the power to confirm…

3. Expenditure of ESOP allowable

The expenditure on account of ESOP is a revenue expenditure and has to be allowed as deduction while computing income. The sole object of issuing shares to employees at a discounted premium is to compensate…

4. Re-opening jurisdiction u/s 263 of Income Tax Act cannot be invoked merely based on suspicion

Re-opening jurisdiction u/s 263 of Income Tax Act cannot be invoked merely based on suspicion. Plethora of decisions are available in this regard and these cases keep continuing. The jurisprudence is settled in the matter…

5. Excess stock found during survey – business income or undisclosed investments

Whoever makes an assertion, must substantiate it. But whoever requires substantiation must also accept it or prove otherwise! In case an assessee explains the source of the investment in excess stock…

DTV92

Direct Tax Vista – Your Weekly Direct Tax Recap

Edn. 91 | Dated: 18.01.2024

CA Vivek Jalan

In this edition:

1. AO cannot revisit the assessment where there was no failure on the part of assessee to disclose all material facts necessary for the purpose of assessment

Assessment orders are not a scrap of paper which can be overturned by reopening the assessment in casual manner. Finality to assessment must be recognized as matter of principle and reopening should be an exception…

2. Issuance of notice u/s 143(2) is mandatory and non-compliance of the same will result in nullifying the assessment orders

Hon’ble SC In the case of GKN Driveshafts (India) Limited v. ITO (2003) 259 ITR19(sc), The Hon’ble Supreme Court has laid down an elaborate procedure as to the manner of dealing with objections raised against…

3. Only short deduction of TDS does not make the entire amount of expense liable for disallowance

Only short deduction of TDS does not make the entire amount of expense liable for disallowance by invoking the provisions of section 40(a)(ia) of the Act. The judgement of Delhi High Court…

4. Even when the assessee has not claimed an expenditure in the P&L account, it be disallowed u/s 43B of the Act

The question is that when the assessee has not claimed it as an expenditure in the P&L account, could it be disallowed u/s 43B of the Act?….The Hon’ble Supreme Court in the case of Chowringhee Sales Bureau Pvt. Ltd…

5. De-commissioning cost for dismantling of old/faulty asset is revenue in nature

De-commissioned cost incurred towards the labour charges for dismantling of old/faulty asset is purely revenue in nature as it cannot add in value or life to the fixed assets…

6. RBI eases credit concentration norms for Middle Layer NBFCs

The Reserve Bank of India has permitted middle layer non-bank financial companies to use credit risk transfer instruments. NBFC-ML will now be able to use these instruments to compute exposure…

DTV91

Direct Tax Vista-Your Weekly Direct Tax Recap
Edn. 90| Dated: 10.01.2024.
CA Vivek Jalan

In this edition:

1. Should employees suffer in case the employer defaults in payment of TDS?
On 15.07.2014, Karnataka High Court in ITA 165/2012 directed the revenue authorities to recover TDS amounting to Rs.302 crores from the Kingfisher airlines. On 18.11.2016, the Kingfisher Airlines Limited was ordered…

2. Non-filing of ITR can lead to prosecution
Taxpayers are now witnessing a new era where economic offenses are no more taken with an attitude of “Letting things be”. Tax Professionals should also change accordingly and ensure that tax compliances are in order…

3. Capital subsidies also taxable…Balance Sheets maybe recalibrated
Whenever, there is a challenge to constitutional validity of a tax statute, the approach of the Court is two-fold – i. To inspect the existence of enacting power ii. To ascertain whether the enacted provision impinges upon any fundamental right…

4. Write back u/s 41(1) is to be taxed in case nexus of original amount with Capital expenditure cannot be demonstrated
Simple Income Tax provisions need simple back up workings and supporting documentary evidence. If those are not available, then there is no point in going to Courts. To Section 41(1) of The Income Tax Act…

5. For the purpose of section 153A/143(3) of the Act, the assessment can be said to be “made” only when the DIN is quoted
The well-established dicta for The Income Tax Dept. is that circulars issued by the CBDT are binding on them. Although, they cannot dictate the manner in which assessment has to be carried out in a particular case…

6. Interest expense incurred on loans taken out to invest in a company in the same line of business as the taxpayer, would be an allowable expense
Interest expense incurred on loans taken out to acquire a controlling interest in a company in the same line of business as the taxpayer would be an allowable expense under section 36(1)(iii) as was held again in the case…

7. Bombay High Court dissects taxability on ‘accrual’ concept, when a dispute is under judicial purview
Mesne profits, which are yet to be determined, do not come within the purview of an accrued income for the purposes of Section 4 and 5 of the Income Tax Act till the judgment in regard to civil dispute was rendered in this regard…

DTV90

Direct Tax Vista-Your Weekly Direct Tax Recap
Edn. 89| Dated: 04.01.2024.
CA Vivek Jalan

In this edition:

1. E-Commerce transactions under Ministry of Finance’s close scrutiny as CBDT further Clarifies w.r.t. TDS u/s 194O in Multiple ECO Model; CBIC also notifies new reporting for transactions with ECO
The CBDT vide Circular No. 20/2023 dated December 28, 2023, has issued guidelines addressing challenges and providing clarity on the application of section 194-O of the Income-tax Act, 1961, particularly in a multiple e-commerce operator…

2. Balance Sheets should be prepared year-on-year to substantiate cash utilization
Section 69A of the Income Tax Act, 1961, is a provision extensively employed by the tax department when issuing notices to taxpayers for cash deposited during demonetization. It empowers the tax authorities to treat…

3. Functional Analysis is important to carve out comparable in Transfer Pricing Cases
Functional analysis is used for transfer pricing purposes. It analyzes the functions performed (taking into account assets used and risks assumed) by associated enterprises in a transaction…

4. Mechanical approval u/s 153D of Income Tax Act may lead to quashing of Orders
Section 153D of The Income Tax Act is not merely a procedural step but a substantive legal requirement, as underscored by the Central Board of Direct Taxes (CBDT) in Circular No. 3 of 2008, dated 12.3.2008…

5. Rejection of books summarily not acceptable, AO has to make a case
Consider a case where net profits have declined due to the following reasons – A. The AO found that the appellant has shown steady decline in net profit rate of 0.51% for AY 2012-13, 4.87% for AY 2011-12 and 6.24% for AY 2010-11…

DTV89

Direct Tax Vista-Your Weekly Direct Tax Recap
Edn. 88| Dated: 27.12.2023.
CA Vivek Jalan

In this edition:

1. CBDT redefines ‘intra-group loans’ and amends safe harbour norms for MNC group transactions
The CBDT vide Notification No. 104/2023 dated December 19, 2023, has issued the Income-tax (Twenty-Ninth Amendment) Rules, 2023…

2. RBI Tightens Norms for Banks, NBFCs Investing in AIFs
In a move aimed at curbing evergreening stressed loans, the RBI has directed banks, NBFCs and other lenders not to invest in any scheme of Alternative Investment Funds…

3. RBI CIMS Project Implementation – Discontinuation of Submission in Legacy XBRL
The RBI, through Circular No. 09/10/11/12 dated December, 2023, announced a significant shift in the reporting mechanism for Rupee Drawing Arrangement, Trade…

4. RBI Tweaks Foreign Exchange Management (Manner of Receipt and Payment) Regulations and notifies New Regulations
The RBI has introduced Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023. As per the newly introduced norms, the receipt and…

5. In cases of Non-residents – positive evidence of accrual/receipt in India is to be brought on record by Department for bringing them to tax in India
Taxation for Non-Residents (NRs) in simple words, is that an NR is liable for tax in India only on those income which has Indian Connection. Incase an NR has…

6. Suspicion cannot take the place of the evidence… Merely an unusual activity does not give an authority to the revenue to make the addition
The Hon’ble Supreme Court in the case of Roshan Di Hatti Vs. CIT [1992] 2 SCC 378 has held that if the assessee fails to discharge its onus by producing cogent…

7. Global Minimum Tax: OECD/G20 Inclusive Framework releases new information on key aspects of the Two-Pillar Solution
On 18 December 2023, the OECD/G20 Inclusive Framework released a third tranche of Administrative Guidance on the Pillar Two Global Anti-Base Erosion Rules…

DTV88

Direct Tax Vista – Your Weekly Direct Tax Recap

Edn. 87 | Dated: 15.12.2023

CA Vivek Jalan

In this edition:

1. Investing in Sovereign Gold Bonds this Winter

Tax people should also invest their monies wisely and Sovereign Gold Bonds are instruments where the capital gains tax arising on redemption to an individual is exempted. The indexation benefits will be provided…

2. Challenging the validity of the notice issued u/s. 274 r.w.s. 271 of Income Tax on the ground of non- striking of the irrelevant limb in the notice

It was held by The Apex Court in the case of Rajesh Kumar v. CIT [(2007) 2 SCC 181] that when by reason of action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice must be followed…

3. Excel Sheets cannot be considered as parallel books of account

An interesting order in the matter of Sections 143(3) and 153A of Income Tax Act was passed in the case of SUMATICHAND TOLAMAL GOUTI Vs DY. COMMISSIONER OF INCOME TAX [2023-VIL-1629-ITAT-MUM]…

4. Apex Court defines market value

Where a person imposes stringent conditions to sell goods in the open market, making it unviable for third party consumers to purchase such goods and thus virtually forces a sale to itself, such a sale price…

5. Suo-motto add back of expenditure, on which no TDS is applied, does not exonerate assessee from liability of interest under Section 201(1A)

Provision of expenses in the form of estimates follows from preexisting contracts with the known parties for identified services and hence the accounting of amount liable to be paid to these parties for services availed…

6. For availing Foreign Tax Credit, filing of Form 67 is a procedural / directory requirement and is not a mandatory requirement

Where an assessee is entitled to claim relief under section 90 of the Income Tax Act, no disallowance can be made on the sole ground that the form 67 prescribed under section 128(8) was not filed within the time stipulated…

7. Processing Fee of Loan taken for acquiring a Capital Asset is allowable as a deduction in the year of expenditure

Funding is required in business from time to time and these are regular business expenses and the charges for such loans taken are allowable as a deduction in the year of incurring such expense itself…

 

DTV87

Direct Tax Vista – Your Weekly Direct Tax Recap

Edn. 86 | Dated: 06.12.2023

CA Vivek Jalan

In this edition:

1. MAT Credit to be allowed on the basis of Form 29B

Simple matters should be kept simple. Sometimes it is made complicated when argued incorrectly or understood with a presumption. The claim of assessee in respect of MAT credit pertaining to a prior year…

2. Penalty is allowed if it is compensatory and teaches the assessee how to run its business in future… It is disallowed if it is a punishment for intentional violation of a law

The question asked many times is whether all penalties are disallowed under the Income tax Law as being expenses made for violations of a law. Prior to Explanation 1 of Sec 37 of The Income Tax Act, there were a catena…

3. CSR expenditure is allowable u/s 80G of The Income Tax Act – On the maxim of ‘Expressio Unius Esl Exclusio Alterius’

Allowability of CSR expenditure has been sealed after Explanation 2 to Section 37(1) was inserted in the Income tax Act 1961 w.e.f. 1.4.2015. It reads as – “Explanation 2- For the removal of doubts, it is hereby declared…

4. If exempt income is offered to tax, no disallowance can be made for the corresponding expenditure

From a combined reading of Section 14A and Rule 8D of The Income Tax Law, the inescapable conclusion is that Rule 8D provides for allocation of expenditure relatable to exempt income and that such expenditure…

5. CBDT Extends Time Limit to Process Refund Claimed ITRs for AYs 2018-19 to 2020-21 toJanuary 31, 2024

In October the CBDT has granted a deadline extension until January 31, 2024, for processing electronically filed income returns with refund claims up to Assessment Year 2017-18. Now It has also noted technical issues…

6. Better accounting can help in better tax compliance

It is always advisable for Individuals to make their balance sheet and cash flow statements for better reflection on the computation of income and not make basic accounting mistakes. Further the vouchers and invoices…

7. Sec 263 cannot be invoked without any analysis by the PCIT himself

It was held in the case of VOLKSWAGEN INDIA PRIVATE LIMITED Vs PCIT-4, PUNE [2023-VIL-1565-ITAT-PNE] that Sec 263 cannot be invoked merely on the request of AO and without any analysis by the PCIT satisfying himself…

8. Business Expenditures – to be allowed… but dis-allowed

Many a times certain expenses are disallowed by AOs in assessments wherein the jurisprudence is very clear. We list down some of them in our articles. Here are a few more – Revenue expenditure consumed over a period of time…

9. Error Trade loss allowed for share brokers

The nature of business of share broking agencies are such that there are certain losses arising out of the purchase and sale of shares with an obligation of payments and delivery. Certain times the client does not accept the loss…

 

DTV86

Direct Tax Vista-Your Weekly Direct Tax Recap
Edn. 85| Dated: 29.11.2023.
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. Income Tax Dept. can share taxpayer’s information with UIDAI
The CBDT vide Notification No. 99/2023 dated November 21, 2023, designated the Deputy Director General (Tech Development Division) of the Unique Identification Authority of India (UIDAI), under Section 138(1)(a)(ii)…

2. Supreme Court again interprets the term ‘derived from’
The term ‘derived from’ has a definite but narrow meaning – It cannot receive a flexible or wider connotation like the word ‘relates to’ or ‘attributable to’. The Supreme Court in the case of SHAH ORIGINALS…

3. Resale method appropriate in Transfer Pricing where there is no Value Addition to traded goods by the distributor
Incase of a pure trading company involved in the distribution activity without adding any value to the purchased product, RPM is the most appropriate method in Transfer Pricing as was held by The ITAT Delhi…

4. Reopening is an extreme step and must be initiated only on the basis of tangible, concrete and fresh evidence not appraised earlier
The Supreme Court in the case of A.L.A. Firm vs. CIT reported in 102 ITR 622 held that where the AO had not considered the material and subsequently come by the material from the record itself…

5. The amount of disallowance under section 14A of the Income Tax Act cannot be more than exempt income
Where an assesses make investments that result in tax-free income, generally the amount that is disallowed under section 14A of the Income Tax Act read with Rule 8D(2)(iii), is 0.5% of the average value of investment…

6. Excess payment to related parties can be distinguished by substantive evidence and not self-serving documents
Excess payment to directors can be distinguished and may be allowed incase following is established – 1. Business advantages accrued to the assessee due to conditions of payment to directors, as against third parties…

7. Determination of date of transfer of capital asset before and after AY 2017-18… where two AYs are involved
On and from AY 2017-18, Special provisos were added to Section 50C(1) of Income Tax Act, for full value of consideration in certain cases. The Section with the provisos hold that…

8. Transfer Pricing adjustments for mere reimbursements
Consider a case of reimbursement which is merely recovered without any mark up. The same would be debited and then netted off with the receipts and not result in a line item of the financials…

9. An order rejecting a low/NIL TDS deduction application should be a speaking and well-reasoned order
Rule 28AA of Income Tax Rules requires that an Assessing Officer, on an application made by a person under Rule 28(1) should satisfy himself that existing and estimated tax liability of a person justifies…

10. It is for the assessee to decide whether the debt has become bad or not… There is no relevance and compulsion to put any effort for recovery
Many a times a debt has to be written off due to business reasons. Say a regular customer disputes one invoice and pays off the others – in this case a business call needs to be taken that for business purpose…

.

DTV85

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:

Link- https://taxconnect.co.in/direct-tax-vista/

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…

DTV84

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:

Link- https://taxconnect.co.in/direct-tax-vista/

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)…

DTV83

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…

DTV82

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:

Link- https://taxconnect.co.in/direct-tax-vista/

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…

DTV81

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…

DTV79

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…

DTV78

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…

DTV77

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…

DTV76

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…

 

DTV75

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…

 

DTV74

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…

DTV73

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…

 

DTV72

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…

 

DTV71

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…

 

DTV70

Direct Tax Vista – Your Weekly Direct Tax Recap
Edn. 69 | Dated: 01.08.2023
CA Vivek Jalan

In this edition:

  1. 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” …

  1. 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…

  1. 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…

  1. 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…

  1. 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…

 

DTV69

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…

 

DTV68

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…

 

DTV67

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…

DTV66

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…

DTV65

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…

 

DTV64

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…

DTV63

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…

DTV62

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…

 

DTV61

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…

 

DTV60

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…

 

DTV59

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…

 

DTV58

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.

 

DTV57

7-Rules on Corporate Restructurings and Holding Structures

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.

 

DTV56

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.

 

DTV55

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………………

 

DTV54

4-Guidance on Deemed Consolidation test 20230414

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.

DTV53

3-Guidance on Rebasing monetary thresholds 20230407

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…

 

DTV52

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)];…

 

DTV51

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…

 

DTV49

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…

 

DTV48

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…

 

 

DTV45

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