PFA
Entertainment tax subsidy is a capital receipt even though the source is the public who visit the cinema hall after it becomes operational
(i) The UP Scheme under which the assessee claims exemption to the extent of entertainment tax subsidy, claiming it to be capital receipt, is clearly designed to promote the investors in the cinema industry encouraging establishment of new multiplexes. A subsidy of such nature cannot possibly be granted by the Government directly. Entertainment tax is leviable on the admission tickets to cinema halls only after the facility becomes operational. Since the source of the subsidy is the public at large which is to be attracted as viewers to the cinema halls, the funds to support such an incentive cannot be generated until and unless the cinema halls become functional.
(ii) The State Government had offered 100% tax exemptions for the first three years reduced to 75% in the remaining two years. Thus, the amount of subsidy earned would depend on the extent of viewership the cinema hall is able to attract. After all, the collections of entertainment tax would correspond to the number of admission tickets sold. Since the maximum amount of subsidy made available is subject to the ceiling equivalent to the amount invested by the assessee in the construction of the multiplex as also the actual cost incurred in arranging the requisite equipment installed therein, it naturally follows that the purpose is to assist the entrepreneur in meeting the expenditure incurred on such accounts. Given the uncertainties of a business of this nature, it is also possible that a multiplex owner may not be able to muster enough viewership to recover all his investments in the five year period. 34. Seen in the above light, we are of the considered view that it was unreasonable on the part of the Assessing Officer to decline the claim of the assessee about the subsidy being capital receipt. Such a subsidy by its very nature, was bound to come in the hands of the assessee after the cinema hall had become functional and definitely not before the commencement of production. Since the purpose was to offset the expenditure incurred in setting up of the project, such receipt (subject, of course, to the cap of amount and period under the scheme) could not have been treated as assistance for the purposes of trade.
PFA
Disallowance u/s 14A r.w. Rule 8D cannot exceed the exempt income
The totality of facts clearly indicates that no borrowed funds were utilized for earning the exempt income by the assessee and further the dividend were directly credited in the bank account of the assessee and no expenditure was claimed. The assessee only received Rs.1,82,362 as dividend income, therefore, there is no question of disallowance of Rs.14,58.412 by invoking section 14A r.w. Rule 8D. At best, if any disallowance could be made that can be restricted to Rs. 1,485 which were claimed as demat charges. Disallowance u/s 14A r.w. Rule 8D cannot exceed the exempt income.
PFA
S. 234B: View in Alcatel Lucent that assessee must pay interest for short-fall of advance-tax if it induced payee not to deduct TDS cannot be followed. View in Jacobs has to be followed because obligation of payer to deduct TDS is absolute & not dependent on assertion of payee. Impact of Proviso to s. 209(1) inserted by FA 2012 w.e.f. 1.4.2012 considered
(i) In Jacabs Civil Inc 330 ITR 578 (Del) it was held that interest u/s 234B cannot be levied on the assessee on the ground of non-payment of advance tax because the obligation was upon the payer to deduct tax at source before making remittances to them. A contrary view was taken in Alcatel Lucent 264 CTR 240 (Del) and it was held that since the assessee, having denied tax liability during reassessment, caused the payer to erroneously refrain from deducting tax under Section 195, it must thus suffer an interest for nonpayment of advance tax;
(ii) The view in Jacabs Civil Inc 330 ITR 578 (Del) opened the window for the assessee to take tax credit of an amount that was deductible, even if it was not actually deducted. In recognition of this anomalous situation, Parliament inserted a proviso in the Finance Act, 2012, – with prospective effect from 1.4.2012, to Section 209 (1). This Court is of the opinion that the law prior to the 2012 amendment must be read to prevent such anomalies from arising;
(iii) This Court respectfully cannot apply the view taken in Alcatel Lucent to this case. This is because if the payer deducts tax at source only when the assessee admits tax liability, then deductions would not be made in cases where the assessee either falsely or under a bona fide mistake denies tax liability. Tax obligations cannot be founded on assertions of interested parties. In such cases, the payer's obligation to deduct tax would depend on the payee's opinion of whether it is liable to tax, which may differ from its actual liability to tax as determined by the AO's final order. This effectively authorizes the assessee and the payer to contract out of the statutory obligation to deduct tax at source, which in this case, is located in Section 195(1). Surely this could not be the Parliamentary intent. If such were the case, there would have been no need to treat the payer as an assessee-in-default for failure to deduct tax at source, under Section 201.This Court is thus in agreement with the position of law in Jacabs (supra), that the obligation of the payer to deduct tax is absolute.
(iv) The implication of an absolute obligation upon the payer to deduct tax at source under Section 195(1) is that it becomes the responsibility of the payer to determine the amount it ought to deduct from the remittance to be paid to the assessee, towards tax. This determination would depend directly on the income of the assessee that is taxable in India on account of being attributable to its PE in India. Thus, the assessee's liability to tax does not depend on its own view of its PE status, or its admission or denial of tax liability. If an assessee files NIL returns at the stage of assessment, and maintains that it is not liable to tax in India, the payer is obliged to apply to the AO to determine what portion, if any, of its remittance to the assessee, is liable to be deducted at source towards tax.
(v) The view of this Court finds confirmation in the position of law as it stands at present, after the Finance Act, 2012; should a situation akin to that in Alcatel Lucent arise, the payer would be treated as the assessee-in-default according to Section 201, and the payee/assessee would not be permitted a tax credit under the proviso in Section 209(1)(d). Clearly, the anomaly of an assessee denying tax liability (whether under a bona fide mistake or by deceit), thereby not suffering a tax deduction at source, and still being permitted a tax credit for the tax deductible, is remedied after the Finance Act, 2012.
(vi) Alcatel Lucent, in any event, can be distinguished on the ground that the Court was persuaded to confirm the levy of interest under Section 234B, only on account of the equities that needed to be balanced in those peculiar facts, in favour of taxability. This Court finds that no need is made out in these facts to balance any equities in these facts, as the assessee has not vacillated in its stand as to the existence of a PE in India or otherwise. In any event, as observed earlier, the position of law itself requires that the tax be deducted at source, whatever may be the assessee's stance, failing which the payer is treated as an assessee-in-default under Section 201, and the payee is required to discharge its liability to pay the tax that was not deducted under Section 191.
ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS
F Sales amount cannot be treated as unexplained cash credit : Wellness Communication P. Ltd. v. ITO (Mumbai) p. 86
F Expenditure incurred for developing prototypes of products for specific customers according to their specifications., is revenue in nature and eligible for deduction : Asst. CIT v. Besson Musical Instruments P. Ltd. (Delhi) p. 90
F Capital gain on sale of shares to be computed by taking original cost of acquisition of membership card and allowing indexation in accordance with law : Dy. CIT v. G. Das Capital Markets P. Ltd. (Mumbai) p. 94
F Co-operative bank : Financial assistance rendered by State Government with object of safeguarding interest of farmers and depositors and regularising normal banking activity and cannot be business activity not chargeable to tax : Nanded District Central Co-operative Bank Ltd. v. Dy. CIT (Pune) p. 532
F Where assessee cannot be held guilty of concealment of income merely for seeking to be taxed at concessional rate by mistake, deletion of penalty justified : Asst. CIT v. Smt. Cecilia Haresh Chaganlal (Mumbai) p. 567
F Assessee cannot be expected to further substantiate manner of earning of income if no questioning done u/s. 132(4), penalty cannot be levied : Sunil Kumar Bansal v. Dy. CIT (Chandigarh) p. 576
F Charitable purpose : Where trust running educational institutions and income incidental to main activity, exemption cannot be denied : Dy. CIT v. R. N. Shetty Trust (Bangalore) p. 584 (10-12-2014)
F Infrastructure facility : Deduction cannot be denied in succeeding years without disturbing relief granted for initial year : Dy. CIT v. Selvel Advertising P. Ltd. (Kolkata) p. 611 (1-1-2015)
F LED video display boards are temporary structures, assessee entitled to 100 per cent depreciation : Dy. CIT v. Selvel Advertising P. Ltd. (Kolkata) p. 611 (1-1-2015)
F Depreciation : Additional depreciation : Once conditions regarding claim of depreciation examined in first year cannot be denied in next AY, assessee entitled for balance unutilised 50 per cent. of additional depreciation : Century Enka Ltd. v. Dy. CIT (Kolkata) p. 644 (2-1-2015)
F Appeal to Appellate Tribunal : Instruction of CBDT revising monetary limits for appeals by Department applicable to pending appeals : ITO v. Santo Stores (Kolkata) p. 665 (6-1-2015)
| COMPANY LAW INSTITUTE OF INDIA PVT. LTD. No. 2, Vaithyaram Street, T.Nagar, Chennai - 600017. Phone: (044) 24350752 - 55 Fax: (044) 24322015 info@cliofindia.com |
__._,_.___
No comments:
Post a Comment