CBDT notifies India-Liechtenstein Tax info exchange agreement wef 01.04.2013
Notification No. 30/2014 , Dated 6-6-2014
Whereas, an agreement (hereinafter referred to as the said agreement) between the Government of the Republic of India and the Government of the Principality of Liechtenstein, for the exchange of information on tax matters was signed at Berne, Switzerland on the 28th day of March, 2013;
2 .And whereas, the date of entry into force of the said agreement is the 20th of January, 20014, being one month from the relevant date on which the last of the notifications of completion of the procedures as required by the respective laws for entry into force of the said agreement was received, in accordance with paragraph 1 Article 11 of the said agreement:
3. And whereas, the said agreement shall have effect for all requests made in respect of taxable periods beginning on or after 1st April, 2013, in accordance with paragraph 2 of the Article 11 of the said agreement;
4. Now, therefore, in exercise of the powers confirmed by section 90 of the Income tax Act, 1961 (43 of 1961), the Central Government hereby directs that the said agreement between the Government of the Republic of India and the Government of the Principality of Liechtenstein on the exchange of information on tax matters, as set out in the annexure hereto, shall have effect for all requests made in respect of taxable periods beginning on or after 1st April, 2013.
Annexure
AGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE PRINCIPALITY OF LIECHTENSTEIN ON THE EXCHANGE OF INFORMATION ON TAX MATTERS
The Government of the Republic of India and the Government of the Principality of Liechtenstein,
Desiring to facilitate the exchange of information with respect to taxes, Have agreed as follows:
ARTICLE 1
OBJECT AND SCOPE OF THE AGREEMENT
The competent authorities of the Contracting Parties shall provide assistance through exchange of information that is foreseeably relevant to the administration and enforcement of the domestic laws of the Contracting Parties concerning taxes covered by this Agreement. Such information shall include information that is foreseeably relevant to the determination, assessment and collection of such taxes with respect to persons subject to such taxes, the recovery and enforcement of tax claims, or the investigation or prosecution of tax matters in relation to such persons. Information shall be exchanged in accordance with the provisions of this Agreement and shall be treated as confidential in the manner provided in Article 8. The rights and safeguards secured to persons by the laws or administrative practice of the requested Party remain applicable to the extent that they do not unduly prevent or delay effective exchange of information.
ARTICLE 2
JURISDICTION
A requested Party is not obligated to provide information which is neither held by its authorities nor in the possession or control of persons who are within its territorial jurisdiction.
ARTICLE 3
TAXES COVERED
1. This agreement shall apply to taxes of every kind and description imposed in the Contracting Parties.
2. This Agreement shall also apply to any identical or substantially similar taxes imposed after the date of signature of this Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting Parties shall notify each other of any substantial changes to the taxes covered by this Agreement and the related information gathering measures.
ARTICLE 4
DEFINITIONS
1. For the purposes of this Agreement, unless otherwise defined:
(a) the term "India" means the territory of India and includes the territorial sea and airspace above it, as well as any other maritime zone in which India has sovereign rights, other rights and jurisdiction, according to the Indian law and in accordance with international law, including the U.N. Convention on the Law of the Sea;
(b) the term "Liechtenstein" means, when used in a geographical sense, the area of the sovereign territory of the Principality of Liechtenstein;
(c) the term "Contracting Party" means India or Liechtenstein as the context requires;
(d) the term "competent authority" means
(i) in the case of India, the Finance Minister, Government of India, or its authorized representative;
(ii) in the case of Liechtenstein, the Government of the Principality of Liechtenstein, or its authorised representative;
(e) the term "person" includes an individual, a company, a dormant inheritance and any other body of persons;
(f) the term "company" means any body corporate, as well as entities and special asset endowments that are treated as a body corporate for tax purposes;
(g) the term "publicly traded company" means any company whose principal class of shares is listed on a recognised stock exchange provided its listed shares can be ' readily purchased or sold by the public. Shares can be purchased or sold "by the public" if the purchase or sale of shares is not implicitly or explicitly restricted to a limited group of investors;
(h) the term "principal class of shares" means the class or classes of shares representing a majority of the voting power or of the statutory capital of the company.
(i) the term "recognised stock exchange" means
(i) in India, the National Stock Exchange, the Bombay Stock Exchange, and any other stock exchange recognised by the Securities and Exchange Board of India;
(ii) for Liechtenstein, any stock exchange that fulfils the material requirements of Article 4 of the directive 2004/39/EC of the European Parliament and the Council of 21 April 2004; and
(iii) any other stock exchange which the competent authorities agree to recognise for the purposes of this Agreement.
(j) the term "collective investment fund or scheme" means any pooled investment vehicle, irrespective of legal form.
(k) the term "public collective investment fund or scheme" means any collective . investment fund or scheme provided the units, shares or other interests in the fund or scheme can be readily purchased, sold or redeemed by the public. Units, shares or other interests in the fund or scheme can be readily purchased, sold or redeemed "by the public" if the purchase, sale or redemption is not implicitly or explicitly restricted to a limited group of investors;
(l) the term "tax" means any tax to which this Agreement applies;
(m) the term "requesting Party" means the Contracting Party requesting information;
(n) the term "requested Party" means the Contracting Party requested to provide information;-
(o) the term "information gathering measures" means laws and administrative or judicial procedures that enable a Contracting Party to obtain and provide the requested information;
(p) the term "information" means any fact, statement, document or record in whatever form;
2 . As regards the application of this Agreement at any time by a Contracting Party, any term not defined therein shall, unless the context otherwise requires or the competent authorities agree to a common meaning pursuant to the provisions of . Article 10 of this Agreement, have the meaning that it has at that time under the law of that Party, any meaning under the applicable tax laws of that Party prevailing over a meaning given to the term under other laws of that Party.
ARTICLE 5
EXCHANGE OF INFORMATION UPON REQUEST
1. The competent authority of the requested Party shall provide upon request information for the purposes referred to in Article 1. Such information shall be exchanged without regard to whether the requested Party needs such information for its own tax purposes or whether the conduct being investigated would constitute a crime under the laws of the requested Party if such conduct occurred in the requested Party.
2 .If the information in the possession of the competent authority of the requested Party is not sufficient to enable it to comply with the request for information, that Party shall use all relevant information gathering measures to provide the requesting Party with the information requested, notwithstanding that the requested Party may not need such information for its own tax purposes.
3. If specifically requested by the competent authority of the requesting Party, the competent authority of the requested Party shall provide information under this Article, to the extent allowable under its domestic laws, in the form of depositions of witnesses and authenticated copies of original records.
4. Each Contracting Party shall ensure that its competent authority, for the purposes of this Agreement, has the authority to obtain and provide upon request:
(a) information held by banks, other financial institutions, and any person, acting in an agency or fiduciary capacity including nominees and trustees;
(b) information regarding the ownership of companies, partnerships, collective investment funds or schemes, trusts, foundations and other persons, including, within the constraints of Article 2, ownership information on all such persons in an ownership chain; in the case of collective investment funds or schemes, information . on shares, units and other interests; in the case of trusts, information on settlors, . trustees and beneficiaries; in the case of foundations, information on founders, members of the foundation council and beneficiaries. Further, this Agreement does not create an obligation on the Contracting Parties to obtain or provide ownership information with respect to publicly traded companies or public collective investment funds or schemes unless such information can be obtained without giving rise to disproportionate difficulties.
5. The competent authority of the requesting Party shall provide the following information in writing to the competent authority of the requested Party when making a request for information under the Agreement to demonstrate the foreseeable ; relevance of the information sought to the request:
(a) the identity of the person under examination or investigation;
(b) the taxable period for which information is requested;
(c) a statement of the information sought including its nature and the form in which the applicant Party wishes to receive the information from the requested Party;
(d) the tax purpose for which the information is sought;
(e) grounds for believing that the information requested is foreseeably relevant to the administration and enforcement of the domestic tax laws of the applicant Party with regard to the person specified in subparagraph (a);
(f) grounds for believing that the information requested is present in the requested Party or is in the possession or control of a person within the jurisdiction of the requested Party;
(g) to the extent known, the name and address of any person believed to be in possession or control of the requested information;
(h) a statement that the request is in conformity with the laws and administrative practices of the requesting Party, that if the requested information was within the jurisdiction of the requesting Party then the competent authority of the requesting Party would be able to obtain the information under the laws of the requesting Party ; or in the normal course of administrative practice and that it is in conformity with this Agreement;
(i) a statement that the requesting Party has pursued all means available in its own .: territory to obtain the information, except those that would give rise to disproportionate difficulties.
6. The competent authority of the requested Party shall forward the requested . information as promptly as possible to the requesting Party. To ensure a prompt response, the competent authority of the requested Party shall:
(a) Confirm receipt of a request in writing to the competent authority of the requesting . Party and shall notify the competent authority of the requesting Party of deficiencies in the request, if any, within 60 days of the receipt of the request.
(b) If the competent authority of the requested Party has been unable to obtain and provide the information within 90 days of receipt of the request, including if it encounters obstacles in furnishing the information or it refuses to furnish the information, it shall immediately inform the requesting Party, explaining the reason for its inability, the nature of the obstacles or the reasons for its refusal.
ARTICLE 6
TAX EXAMINATIONS ABROAD
1. By reasonable notice given in advance, the applicant Party may request that the requested Party allows representatives of the competent authority of the applicant Party to enter the territory of the requested Party, to the extent permitted under its laws, to interview individuals and examine records with the prior written consent of the individuals or other persons concerned. The competent authority of the requested Party shall notify the competent authority of the applicant Party of the time and place of the meeting with the individuals concerned
2. At the request of the competent authority of the applicant Party, the competent authority of the requested Party may allow representatives of the competent authority of the applicant Party to be present at the appropriate part of a tax examination in the requested Party.
3. If the request referred to in paragraph 2 is acceded to, the competent authority of the requested Party conducting the examination shall, as soon as possible, notify the competent authority of the applicant Party about the time and place of the examination, the authority or official designated to carry out the examination and the procedures and conditions required by the requested Party for the conduct of the examination. All decisions with respect to the conduct of the tax . examination shall be made by the requested Party conducting the examination.
ARTICLE 7
POSSIBILITY OF DECLINING A REQUEST FOR INFORMATION
1. The competent authority of the requested Party may decline to assist:
(a) where the request is not made in conformity with this Agreement and, in particular, where the requirements of Article 5 are not met; or
(b) where the requesting Party has not pursued all means available in its own territory to obtain the information, except where recourse to such means would give rise to disproportionate difficulty; or
(c) where disclosure of the information would be contrary to public policy (ordre public) of the requested Party.
2. This Agreement shall not impose on a Contracting Party the obligation:
(a) to provide information subject to legal privilege, or any trade, business, industrial, commercial or professional secret or trade process, provided that information described in paragraph 4 of Article 5 shall not by reason of that fact alone be treated as such a secret or trade process; or
(b) to carry out administrative measures at variance with its laws and administrative practices, provided nothing in this subparagraph shall affect the obligations of a Contracting Party under paragraph 4 of Article 5.
3. A request for information shall not be refused on the ground that the tax claim giving rise to the request is disputed.
4. The requested Party shall not be required to obtain and provide information which the requesting Party would be unable to obtain under its own laws made in similar circumstances from the requested Party under this Agreement.
5. The requested Party may decline a request for information if the information is requested by the applicant Party to administer or enforce a provision of the tax law of the applicant Party, or any requirement connected therewith, which discriminates against a national of the requested Party as compared with a national of the applicant Party in the same circumstances.
ARTICLE 8
CONFIDENTIALITY
1. All information provided and received by the competent authorities of the Contracting Parties shall be kept confidential.
2. This information may be disclosed only to persons or authorities (including courts and administrative bodies) of the Contracting Parties concerned with the purposes specified in Article 1, and used by such persons or authorities only for such purposes. For these purposes information may be used in public court proceedings or in judicial decisions.
3. Such information may not be used for any purpose other than for the purposes stated in Article 1 without the expressed written consent of the competent authority of the requested Party.
4. Information received under this Agreement must not be disclosed to any other State or sovereign territory not party to this Agreement.
5. Personal data may be transmitted to the extent necessary for carrying out the provisions of this Agreement and subject to the provisions of the law of the supplying Party.
6. Information received by the requested Party in conjunction with a request for assistance under this Agreement shall likewise be treated as confidential in the requested Party.
ARTICLE 9
COSTS
1. Unless the competent authorities of the Contracting Parties otherwise agree, ordinary costs incurred in providing assistance shall be borne by the requested Party, and, subject to the provisions of this Article, extraordinary costs incurred in providing assistance shall, if they exceed 500 US Dollars, be borne by the requesting Party.
2. The competent authorities will consult each other, in advance, in any particular case where extraordinary costs are likely to exceed 500 US Dollars to determine whether the requesting Party will continue to pursue the request and bear the cost.
3. The competent authorities shall consult from time to time with regard to this Article.
4. Ordinary costs include internal administration costs, any minor external costs and overhead expenses incurred by the requested Party in reviewing and responding to information requests submitted by the requested Party. Examples of extraordinary costs incurred in providing assistance include, but are not limited to the following:
(a) reasonable fees charged by third parties for copying documents on behalf of the requested Party;
(b) reasonable costs of engaging interpreters, translators or other agreed experts;
(c) reasonable costs of conveying documents to the requesting Party;
(d) reasonable litigation costs of the requested Party in relation to a specific request for information; and
(e) reasonable costs for obtaining depositions or testimony.
ARTICLE 10
MUTUAL AGREEMENT PROCEDURE
1. Where difficulties or doubts arise between the Contracting Parties regarding the implementation or interpretation of this Agreement, the competent authorities shall endeavour to resolve the matter by mutual agreement.
2.In addition to the agreements referred to in paragraph 1, the competent authorities of the Contracting Parties may mutually agree on the procedures to be used under this agreement.
3. The competent authorities of the Contracting Parties may communicate with each other directly for purposes of reaching agreement under this Article.
4. The Contracting Parties may also agree on other forms of dispute resolution.
ARTICLE 11
ENTRY INTO FORCE
1. This Agreement shall enter into force one month from the date on which the Contracting Parties have notified each other that their respective requirements for the entry into force of this Agreement have been fulfiled. The relevant date shall be the day on which the last notification is received.
2. Upon the date of entry into force, this Agreement shall have effect for all requests made but only in respect of taxable periods beginning on or after 1 April, 2013.
ARTICLE 12
TERMINATION
1. This Agreement shall remain in force until terminated by either Contracting Party.
2. Either Contracting Party may terminate the Agreement by serving a written notice of termination to the other Contracting Party through diplomatic channels.
3. Such termination shall become effective on the first day of the month following the expiration of a period of six months after the date of receipt of notice of ; termination by the other Contracting Party. All requests received up to the effective date of termination shall be dealt with in accordance with the provisions of the Agreement.
4. After termination of this Agreement, both Contracting Parties shall remain bound by the provisions of Article 8 with respect to any information provided and received under this Agreement.
In witness whereof, the undersigned, being duly authorized thereto, have signed this Agreement.
DONE in duplicate at twenty eighth day of March 2013, each in the Hindi and English languages, all texts being equally authentic. In case of divergence of interpretation, the English text shall prevail.
Protocol
to the Agreement between the Government of the India and the Government of Principality of Liechtenstein on the exchange of information on tax matters
On the occasion of the signing of the Agreement between the Government of the . Principality of Liechtenstein and the Government of India (the "Contracting Parties") on the exchange of information on tax matters, the Contracting Parties have agreed upon the following provisions, which are an integral part of this Agreement:
1. With respect to subparagraph (f) of paragraph 1 of Article 4, it is understood that the term company includes also establishments ("Anstalten").
2. With respect to subparagraph a of paragraph 5 of Article 5 , it is understood that it is not necessary to provide the name of the taxpayer in order to define its identity, if this identity can be determined from equivalent elements.
3. With respect to paragraph 5 of Article 7, it is understood that this paragraph does not apply to cases where tax rules, including the applicable tax rate, differ only on the basis of residence.
4. Formal communications, including requests for information, made in connection with or pursuant to the provisions of this Agreement entered into will be in writing directly to the competent authority of the other Contracting Party at the addresses given below, or such other address as may be notified by one Contracting Party to the other from time to time. Any subsequent communications regarding requests for information will be in writing between the earlier mentioned competent authorities or their authorised entities, whereas the possibility of direct consultation is being given.
5. Although the Agreement allows only for requests for information with regard to tax years beginning on or after April 1, 2013, the Agreement provides for exchange of documents or information created in or derived from a date preceding April 1, 2013, that are foreseeably relevant to a request relating to tax years beginning on or after April 1, 2013. Such information may be used only if there is an ongoing . investigation or examination with respect to a tax year that begins on or after April 1, 2013. For example:
(a) if assistance is requested with respect to a taxpayer's bank transactions occurring after March 31, 2013, and documents such as, but not limited to, a signature card for the account in question were executed prior to March 31, 2013, the Contracting Parties would exchange the documents.
(b) where a request involves a trust or a foundation and documents such as, as the case may be, the deed of settlement or the foundation statutes and/or bylaws, were executed prior to April 1, 2013, the Contracting Parties would exchange the documents.
6. Liechtenstein and India fully subscribe to the concept of non-discriminatory tax treatment of each other's nationals and agree that, given this Agreement, discriminatory tax treatment based on a lack of tax transparency or effective exchange of information for tax purposes is not justified.
Companies having paid up share capital of 5 crore or more shall have a whole-time company secretary
Ministry of Corporate Affairs has made it compulsory vide notification No. G.S.R. 390(E) dated 09.06.2014 for A company other than a company covered under rule 8 which has a paid up share capital of five crore rupees or more shall have a whole-time company secretary. Extract of Rule- 8 is as follows :-
8. Appointment of Key Managerial Personnel.-
Every listed company and every other public company having a paid-up share capital of ten crore rupees or more shall have whole-time key managerial personnel.
Related Notification is as follows :-
MINISTRY OF CORPORATE AFFAIRS
NOTIFICATION
New Delhi, the 9th June, 2014
NOTIFICATION
New Delhi, the 9th June, 2014
G.S.R. 390(E).—In exercise of the powers conferred by sub-section (1) of Section 203 of the Companies Act, 2013 (18 of 2013) read with clause (51) of Section 2 and Section 469 of the said Act, the Central Government hereby makes the following rules to amend the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, namely:—
1. (1) These rules may be called the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2014.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 after rule 8, the following rule shall be inserted, namely:—
"8A. Appointment of Company Secretaries in companies not covered under rule 8.—A company other than a company covered under rule 8 which has a paid up share capital of five crore rupees or more shall have a whole-time company secretary."
[F. No. 1/11/2013-CL-V]
AMARDEEP SINGH BHATIA, Jt. Secy.
Note : The principal rules were published in the Gazette of India vide notification number G.S.R. 249(E), dated the 31st March, 2014.
ICAI suggests Verification of all income-tax returns by Professionals
Issue/Justification
There are classes of persons who are filing income tax returns but are not declaring their income properly. Either the income is suppressed or various deductions are being claimed which are not legally permissible. With the increase in the work of the Department it is not practicable to scrutinize each and every return. Taking into consideration this aspect the person filing the return takes a calculated risk. Further, basic deductions provided by the Act like section 80C (Rs.1, 00,000), section 80D (15,000), section 24(b)(Rs.1,50,000) being claimed by the individuals and HUFs, in large numbers, have huge revenue impact. To check on the admissibility of the claim for deduction, no proof of investment is called for by the assessee. Today as per e-filing website there are 2.79 crore assessees who have filed return for ITR-1,2,3,4 and 4S online for the AY 2013-14 and are thus expected to have an income of Rs.5,00,000 or more. Considering the slab rate of 10%, the minimum revenue impact is 2,70,000*10.3%*2.79 crore is approximately Rs. 77600 crores. In case the applicable rate of tax is 20.6%, the revenue impact is approx. 155180 crores. In case the applicable rate of tax is 30.9%, the maximum revenue impact is Rs. 232770 crores.
To address this, it is important that all the returns filed are thoroughly checked and cross-verified with the information collected through AIR and other sources by the Department. This process is entirely different from the scrutiny process. In this verification, not only the arithmetical accuracy but the admissibility of the claim regarding the expenditure incurred, income earned or investment made on the basis of the evidence collected from
various sources will also be verified. Since this work is voluminous, the same will also be required to be out-sourced preferably to the professionals understanding the law better and who are in a position to identify the grey areas. Although the chartered accountants, through whom approx 85% of the returns are filed, ensure the correctness of the claim, the law does not recognizes the same. Thus, the chartered accountant is questioned by the assessee, when documents are asked for. In the interest of the revenue, it is imperative to have a certification of claims of deductions under section 80C, 80D, 24(b) and the like. This process once started will ensure better voluntary compliance as every taxpayer filing the return would be aware that the return being filed would be subject to a verification process and he cannot afford to take the liberty of making adjustments which are legally impermissible.
various sources will also be verified. Since this work is voluminous, the same will also be required to be out-sourced preferably to the professionals understanding the law better and who are in a position to identify the grey areas. Although the chartered accountants, through whom approx 85% of the returns are filed, ensure the correctness of the claim, the law does not recognizes the same. Thus, the chartered accountant is questioned by the assessee, when documents are asked for. In the interest of the revenue, it is imperative to have a certification of claims of deductions under section 80C, 80D, 24(b) and the like. This process once started will ensure better voluntary compliance as every taxpayer filing the return would be aware that the return being filed would be subject to a verification process and he cannot afford to take the liberty of making adjustments which are legally impermissible.
Suggestion – Since non verification of admissibility of basic deductions provided in sections 80C, 80D and 24(b) have huge revenue impact, it is imperative to have a certification /verifications of all claims of deductions under section 80C, 80D, 24(b) and the like. In this verification, not only the arithmetical accuracy but the admissibility of the claim regarding the expenditure incurred, income earned or investment made on the basis of the evidence collected from various sources will also be verified. Since this work is voluminous, the same will also be required to be out-sourced preferably to the professionals understanding the law better and who are in a position to identify the grey areas.
(SUGGESTION TO IMPROVE TAX COLLECTION)
Source- Pre-Budget Memorandum – 2014 on Direct Taxes by The Institute Of Chartered Accountant Of India, New Delhi
Income Tax
Whether value of property declared by assessee-seller before Settlement Commission would bind the purchasers - NO: HC
THE assessee is the wife of Mr. Gopal Gupta who was inducted as a director in a company known as D.J. Infrastructure Developers (P) Ltd., which was allotted hotel land at Motia Khan, New Delhi in an auction by the Delhi Development Authority. Thereafter shares were allotted to Gopal Infrastructures (P) Ltd., a group company of Gopal Gupta Group in the DJI. The total cost of land in the books was shown to be Rs 90 crores., however, the AO considered the valuation at Rs 130 crores including a premium computed at Rs 40 crores. It was also the case of the Revenue that since 1/3rd of the shares in DJI were acquired by Gopal Infrastructures the share of the premium would be Rs 13.3 crores which was supposed to be paid by Sh. Gopal Gupta and his wife to the other Group from whom the said shares were acquired.The issue was taken to the Settlement Commission which passed an order accepting the figure of Rs 16 crores.
The issues before the Bench are - Whether the value declared before the Settlement Commission by the seller of the property can bind the purchasers and Whether when the purchaser of the property declares the difference between the value of the property and the amount shown in its return of income before the Settlement Commission, the same amounts to concealment of income. And the verdict goes against the Revenue.
Income Tax - TDS and Section 40(a)(ia) - 2012 Amendment
12.06.2014
Thursday
DEEMED date of payment of tax by the resident payee
As per Section 40(a)(ia) of the Income Tax Act, the following deduction is not allowed:
(ia) Any interest, commission or brokerage, fees for professional services or fees for technical services payable to a resident, or amounts credited or paid to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour carrying out any work), on which tax has not been deducted or, after deduction, has not been paid before the expiry of the time prescribed under sub-section (1) of section 200 and in accordance with the other provisions of Chapter XVII-B:
As per the provisions of Chapter XVII-B of the Income Tax Act, a person is required to deduct tax on certain specified payments at the specified rates if the payment exceeds specified threshold. In case of non-deduction of tax in accordance with the provisions of this chapter, he is deemed to be an assessee in default under section 201(1) in respect of the amount of such non-deduction.
However, section 191 of the Act provides that a person shall be deemed to be assessee in default in respect of non/short deduction of tax only in cases where the payee has also failed to pay the tax directly. Therefore, the deductor cannot be treated as assessee in default in respect of non/short deduction of tax if the payee has discharged his tax liability.
The payer is liable to pay interest under section 201(1A) on the amount of non/short deduction of tax from the date on which such tax was deductible to the date on which the payee has discharged his tax liability directly. As there is no one-to-one correlation between the tax to be deducted by the payer and the tax paid by the payee, there is lack of clarity as to when it can be said that payer has paid the taxes directly. Also, there is no clarity on the issue of the cut-off date, i.e. the date on which it can be said that the payee has discharged his tax liability.
In order to provide clarity regarding discharge of tax liability by the resident payee on payment of any sum received by him without deduction of tax, section 201 was amended by Finance Act 2012 to provide that the payer who fails to deduct the whole or any part of the tax on the payment made to a resident payee shall not be deemed to be an assessee in default in respect of such tax if such resident payee -
(i) has furnished his return of income under section 139;(ii) has taken into account such sum for computing income in such return of income; and(iii) has paid the tax due on the income declared by him in such return of income,
and the payer furnishes a certificate to this effect from an accountant in such form as may be prescribed.
The date of payment of taxes by the resident payee shall be deemed to be the date on which return has been furnished by the payer.
It was also stipulated that where the payer fails to deduct the whole or any part of the tax on the payment made to a resident and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the such resident, the interest under section 201(1A)(i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident payee.
These amendments took effect from 1st July, 2012
Disallowance of business expenditure on account of non-deduction of tax on payment to resident payee
A related issue to the above is the disallowance under section 40(a)(ia) of certain business expenditure like interest, commission, brokerage, professional fee, etc. due to non-deduction of tax. It has been provided that in case the tax is deducted in subsequent previous year, the expenditure shall be allowed in that subsequent previous year of deduction.
In order to rationalise the provisions of disallowance on account of non-deduction of tax from the payments made to a resident payee, section 40(a)(ia) was amended to provide that where an assessee makes payment of the nature specified in the said section to a resident payee without deduction of tax and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the payee, then, for the purpose of allowing deduction of such sum, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee.
These beneficial provisions are to be applicable only in the case of resident payee.
These amendments took effect from 1st April, 2013 and applied in relation to the assessment year 2013-14 and subsequent assessment years.
Section 40(a)(ia) - Is Amendment retrospective?
NOW this amendment raised certain interesting issues.
An assessee for the assessment year 2006-07, did not deduct and pay TDS on an amount of Rs.5,01,872, which he was required to pay. The AO promptly disallowed this amount under section 40(a)(ia) r.w.s. 194 A of the Act. The assessee pleaded that in view of the insertion of second proviso to Section 40(a)(ia) by the Finance Act 2012, and in view of the fact that the recipients of the interest have already included the income embedded in these payments in their tax returns filed under section 139, disallowance under section 40(a)(ia) could not be invoked in this case. It was also contended that even though this proviso is stated to be effective 1st April 2013, since the amendment is "declaratory and curative in nature, and, therefore, it should be given retrospective effect from 1st April, 2005, being the date from which sub-clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004".
This plea did not find favour with the Department and so the assessee is before the Tribunal. The Tribunal looked into the scheme of things and observed,
As long as the assessee cannot be treated as an assessee in default, the disallowance under section 40(a)(ia) cannot come into play either. To understand the effect of this proviso, it is useful to refer to first proviso to section 201(1), which is also introduced by the Finance Act 2012 and effective 1st July 2012, and which provides that "any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident:- (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed."The unambiguous underlying principle seems to be that in the situations in which the assessee's tax withholding lapse have not resulted in any loss to the exchequer, and this fact can be reasonably demonstrated, the assessee cannot be treated as an assessee in default. The net effect of these amendments is that the disallowance under section 40(a)(ia) shall not be attracted in the situations in which even if the assessee has not deducted tax at source from the related payments for expenditure but the recipient of the monies has taken into account these receipts in computation of his income, paid due taxes, if any, on the income so computed and has filed his income tax return under section 139(1). There is also a procedural requirement of issuance of a certificate, in the prescribed format, evidencing compliance of these conditions by the recipients of income, but that is essentially a procedural aspect of the matter. The legislative amendment so brought about by the Finance Act, 2012, so far as the scheme of disallowance under section 40(a)(ia) is concerned, substantially mitigates the rigour of, what otherwise seemed to be, a rather harsh disallowance provision.
Prospective or retrospective? The Tribunal observed,
When we look at the overall scheme of the section as it exists now and the bigger picture as it emerges after insertion of second proviso to section 40(a)(ia), it is beyond doubt that the underlying objective of section 40(a)(ia) was to disallow deduction in respect of expenditure in a situation in which the income embedded in related payments remains untaxed due to non- deduction of tax at source by the assessee. In other words, deductibility of expenditure is made contingent upon the income, if any, embedded in such expenditure being brought to tax, if applicable. In effect, thus, a deduction for expenditure is not allowed to the assessees, in cases where assessees had tax withholding obligations from the related payments, without corresponding income inclusion by the recipient.
On a conceptual note, primary justification for such a disallowance is that such a denial of deduction is to compensate for the loss of revenue by corresponding income not being taken into account in computation of taxable income in the hands of the recipients of the payments. Such a policy motivated deduction restrictions should, therefore, not come into play when an assessee is able to establish that there is no actual loss of revenue. This disallowance does deincentivize not deducting tax at source, when such tax deductions are due, but, so far as the legal framework is concerned, this provision is not for the purpose of penalizing for the tax deduction at source lapses.
So, the ITAT held that the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005 , being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004.
Please see 2014-TIOL-289-ITAT-AGRA
CIT vs. Fr. Mullers Charitable Institution 363 ITR 230 (Karn)
As per sec 13(1)(d), when a trust makes an investment or deposit in violation of sec 11(5), the income derived from such investment will be liable to be taxed but the total income of the assessee would not be denied exemption u/s 11.
Regards,IT : Where in case of a charitable trust, it is found that provisions of section 13(1)(c)(ii) read with section 13(3) are not followed, trust would lose its exemption in entirety, with result that assessment of its income will be made according to provisions of Act
IT : Where assessee-trust, advanced certain money for purchase of land to a person prohibited under section 13(3), in view of fact that sale agreement was cancelled after a long time of paying advance money without assigning any reason and without charging any interest on said advance money, it being a case of violation of section 13(1)(c), assessee's claim for exemption under section 11 was to be rejected
IT : Where in case of a trust cost of asset has been allowed as deduction by way of application of income; then depreciation on same asset cannot be allowed in computation of income of trust
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[2014] 43 taxmann.com 300 (Delhi)
HIGH COURT OF DELHI
Director of Income-tax (Exemption)
v.
Charanjiv Charitable Trust*
S. RAVINDRA BHAT AND R.V. EASWAR, JJ.
IT APPEAL NOS. 321 TO 323 OF 2013†
MARCH 18, 2014
Section 13, read with section 11, of the Income-tax Act, 1961 - Charitable or religious trust - Denial of exemption (Benefit to prohibited persons - Sub-section (1)(c)) - Assessment years 2006-07 and 2007-08 - Whether where in case of a charitable trust, it is found that provisions of section 13(1)(c)(ii) read with section 13(3) are not followed, trust would lose its exemption in entirety, with result that assessment of its income will be made according to provisions of Act - Held, yes - Assessee, a charitable trust, was granted registration under section 12A - Assessee filed its return declaring nil income - Assessing Officer noted that assessee in furtherance of its objects to open a school, entered into agreements with APIL for purchase of land and paid 95 per cent of price as advance money - However, even after lapse of more than one year from date of agreement to sell, sale was not completed and no registered document was executed - Assessing Officer took a view that real motive of assessee was to advance its surplus monies to APIL without charging any interest and since APIL was a prohibited person within meaning of section 13(3), provisions of section 13(1)(c)(ii) were attracted with result that assessee could not be allowed exemption under section 11 - Whether, on facts, and in absence of any explanation as to why sale agreement was cancelled after a long time of paying advance money, impugned finding recorded by Assessing Officer was to be upheld - Held, yes - [Paras 24 and 27] [In favour of revenue]
Section 32, read with section 11, of the Income-tax Act, 1961 - Depreciation - Allowance/rate of (In case of trust) - Assessment years 2006-07 and 2007-08 - Whether where in case of a trust cost of asset has been allowed as deduction by way of application of income, then depreciation on same asset cannot be allowed in computation of income of trust - Held, yes [Para 30] [In favour of revenue DIT vs. M/s. Wizcraft International Entertainment Pvt. Ltd. (Bom.), ITA No. 2293 of 2011, Order dated 21.04.2014
Commission paid to an agent for services rendered abroad and payment by way of reimbursement of expenses are not taxable in India
Facts
The assessee, an event organizer, entered into an agreement with "Colin Davie Artiste Services", a UK company, under which the latter agreed to procure renowned foreign entertainers like "Diana King" & "Shaggy" for performances in India. The assessee agreed to pay a fee to the entertainers as well to Colin Davie & to reimburse expenses incurred. In respect of the fees paid to the entertainers, the assessee accepted that the same was chargeable to tax in India under Article 18 of the India-UK DTAA and deducted tax at source u/s 195. However, in respect of the fees paid to Colin Davie and amounts paid towards reimbursement of expenses, the assessee argued that the same were not liable to tax in India. The AO took the view that as the payment to Colin Davie was high, it was actually meant for payment to the entertainers. He also held that the nature of services agreed to be rendered by Colin Davie were such that it could not be performed without having a presence in India. On appeal, the CIT (A) as well as the ITAT accepted the stand of the assessee.
Held
The CIT(A) and Tribunal rightly arrived at the conclusion that Mr. Colin Davie did not perform any services in India, but they were rendered outside India. Therefore, commission income to the agent is not liable to tax in India and there was no obligation on the part of the assessee to deduct the tax at source at the time of making of payment. In so far as payment or reimbursement of expenses in connection with the visit and performance of the artists in India, the amount reimbursed to them was towards air travel and was supported by documents. On that, tax need not be deducted.
For Full Text: visit www.itatonline.org
IT : If plant and machinery taken on lease is duly reflected in books of lessor, rent thereon could not be disallowed
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[2014] 45 taxmann.com 293 (Karnataka)
HIGH COURT OF KARNATAKA
Mahashakthi Construction Co.
v.
Joint Commissioner of Income-tax (Assessment)*
DR. K. BHAKTHAVATSALA AND B. SREENIVASE GOWDA, JJ.
IT APPEAL NO. 5024 OF 2011†
SEPTEMBER 14, 2012
Section 37(1), read with section 260A, of the Income-tax Act, 1961 - Business expenditure - Allowability of (Lease rental) - Assessment year 1997-98 - Assessee had taken plant and machinery on lease and claimed deduction on rent paid thereon while filing income tax return - Admittedly, amount paid by assessee was reflected in books of lessor and taken into account as income of lessor and tax was paid thereon - There was no material placed on record that transaction was hire-purchase and not lease agreement - However, Assessing Officer disallowed deduction only for current assessment year while for previous or subsequent years it was allowed - Whether Assessing Officer was not justified in disallowing said expenditure - Held, yes [Para 6] [In favour of assessee]
FACTS
| ■ | The assessee had taken plant and machinery on lease for the purpose of contract business and paid lease rent to the lessor as per lease agreement and filed income tax return claiming deduction thereof. | |
| ■ | The deduction claimed was disallowed by the Assessing Officer on the ground that the plant and machinery would become property of the assessee even though there was no agreement to that effect. | |
| ■ | On the consecutive appeals, both the Commissioner (Appeals) and the Tribunal dismissed the appeal. | |
| ■ | In instant appeal before the High Court, the assessee contended that :— |
| - | The ownership of the machinery would remain with the lessor and after the expiry of the lease, the machineries were to be delivered back to the lessor. | |
| - | The Assessing Officer did not take into account the factum of lease rentals paid by the lessee to the lessor was taxed in the hands of the lessor and there was no suspicious circumstances to doubt the genuineness of the lease and, thus, the Assessing Officer had erroneously come to the conclusion that it was a hire purchase agreement and not a lease. |
HELD
| ■ | The amount paid by the appellant/assessee to Murudeshwar Finance & Leasing Ltd. was reflected in the books of lessor and taken into account as income of the Lessor and paid tax thereon. There is no material placed on record to show that the transaction is that of hire purchase and not lease agreement. It is the case of the assessee that the Compressors and Excavators were utilised for the purpose of business of the appellant and there is not a scintilla of material placed on record to suspect genuineness of the transaction. The Revenue has not denied that it did not allow such deduction for the previous years and subsequent year of assessment year in question. The Assessing Officer has disallowed the deduction only for the assessment year 1997-98. The Commissioner (Appeals) and the Income Tax Appellate Tribunal erred in confirming the order of the Assessing Officer, in so far as the deduction sought for. For the reasons stated, supra, the substantial question of law is to be answered in the negative in favour of the appellant/assessee and against the Revenue. [Para 6] |
CASE REVIEW
S.A. Builders Ltd. v. CIT [2007] 288 ITR 1/158 Taxman 74 (SC) (para 6) followed.
A.S. Kularni and Ganesh R. Ghale for the Appellant. Y.V. Raviraj for the Respondent.
JUDGMENT
Dr. Bhakthavatsala, J. - This is an Appeal filed under Section 260A of the Income-tax Act, 1961 by the assessee challenging the order dated 16.3.2010 made in ITA No.87/CIT(A)HBL/06-07 on the file of Commissioner of Income Tax (Appeals) (Annexure-C) and the order dated 5.8.2011 made in ITA No.702(Bang)/2010 on the file of Income Tax Appellate Tribunal at Annexure-D.
2. Brief facts of the case leading to the filing of the Appeal may be stated as under:
"The appellant/assessee had taken Plant and Machinery viz., Compressors and Excavators on lease for the purpose of contract business and paid lease rentals of Rs. 11,74,800/- to the lessor-M/s. Murudeshwar Finance & Leasing Ltd., as per the lease agreement and filed its Income Tax Returns for the assessment year 1997-98 claiming deduction of the above said amount, but it was disallowed by the Assessing Officer on the ground that machinery would become the property of the Lessee even though there is no agreement to that effect and ownership remains with the Lessor. The order of the Assessing Officer for the assessment year 1997-98 was challenged before the Commissioner of Income Tax (Appeals) unsuccessfully. The matter was carried before the Income Tax Appellate Tribunal, but the Tribunal dismissed the Appeal confirming the order of dismissal. Therefore, the Assessee is before this Court."
3. In this Appeal, the following substantial question of law arises:
"Whether the Assessing Officer is justified in disallowing the expenditure incurred towards lease of Plant and Machinery by the Assessee for the assessment year 1997-98 and when the Assessing Officer has allowed such deduction for the previous and subsequent assessment years ?"
4. Learned Counsel for the appellant submitted that the Assessee took Compressors and Excavators by entering a lease agreement with M/s. Murudeshwar Finance & Leasing Ltd. and the machinaries were utilised for the purpose of its business and paid a sum of Rs. 11,74,800/- towards lease rentals to the Lessor and also claimed deduction for the assessment year 1997-98, but the deduction was disallowed on the ground that the machinery would become the property of the Lessee at the end of the lease period though there is no contract to that effect and ownership of the machinery remains with the Lessor. He further submitted that after the expiry of the lease, the machineries were delivered back to the Lessor, but the Assessing Officer has erroneously come to the conclusion that it was an hire purchase agreement and not a lease. It is also contended that the Assessing Officer disallowed the lease rentals paid to the Lessor towards the machinery-Compressors as well as Excavators. It is also contended that the Assessing Officer did not take into account the factum of lease rentals paid by the Lessee to the Lessor was taxed in the hands of the Lessor and there was no suspicious circumstances to doubt the genuiness of the lease. He cited a decision inS.A. Builders Ltd. v. CIT [2007] 288 ITR 1/158 Taxman 74 (SC) on the point that once it is established that there was nexus between the expenditure and the purpose of business, the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case and no businessman can be compelled to maximise his profits. Therefore, he submits that the substantial question of law formulated may be answered in favour of the appellant/assessee and set aside the impugned orders.
5. Learned Counsel appearing for the respondent/Revenue submits that there is no illegality or infirmity in the impugned orders.
6. Admittedly, the amount paid by the appellant/assessee to M/s. Murudeshwar Finance & Leasing Ltd. was reflected in the books of Lessor and taken into account as income of the Lessor and paid tax thereon. There is no material placed on record to show that the transaction is that of hire purchase and not lease agreement. It is the case of the Assessee that the Compressors and Excavators were utilised for the purpose of business of the appellant and there is not a scintilla of material placed on record to suspect genuiness of the transaction. The Revenue has not denied that it did not allow such deduction for the previous years and subsequent year of assessment year in question. The Assessing officer has disallowed the deduction only for the assessment year 1997-98. The decision in S.A. Builders Ltd. (supra) cited by the learned Counsel for the appellant/assessee is applicable on all the fours to the case on hand and also supports the case of the appellant. In our view, the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal erred in confirming the order of the Assessing Officer, in so far as the deduction sought for. For the reasons stated, supra, we answer the substantial question of law in the negative in favour of the appellant/assessee and against the Revenue.
7. In the result, we pass the following order:
Appeal is allowed and the impugned orders of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal dated 16.3.2010 and 5.8.2011 at Annexures C and D, respectively, are set aside.
SB*In favour of assessee.
†Arising out of order of ITAT in IT Appeal No. 702/Bang./2010, dated 5-8-2011.
Regards,
HC raps ITAT for remanding case when all info was available to examine nature of sec. 14A disallowance
June 12, 2014[2014] 45 taxmann.com 368 (Gujarat)
IT : Where in appellate proceedings before Tribunal, assessee raised a new plea that even suo motu disallowance in terms of section 14A made in return was not justified, in view of fact that entire material necessary to examine nature of disallowance to be made under section 14A was already on record, Tribunal was to be directed to give its conclusive opinion on issue in dispute on merits
IT : Chapter XIV-B does not preclude Assessing Officer to proceed against an assessee by issuing notice under section 148 and, therefore, pursuant to search proceedings carried out in case of another person, it is open to Assessing Officer to either proceed under Chapter XIV-B or under section 148 against assessee
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[2014] 45 taxmann.com 144 (Karnataka)
HIGH COURT OF KARNATAKA
Gudwill Housing Ltd.
v.
Income Tax Officer, Ward 11(2), Bangalore*
DILIP B. BHOSALE AND B. MANOHAR, JJ.
IT APPEAL NO. 721 OF 2007†
MARCH 24, 2014
Section 158BD, read with section 148 of the Income-tax Act, 1961 - Block assessment in search cases - Undisclosed income of any other person (Scope of) - Block assessment period 1996-97, 1998-99 and 1999-2000 - Whether chapter XIV-B does not preclude Assessing Officer to proceed against an assessee by issuing notice under section 148 and, therefore, pursuant to search proceedings carried out in case of another person, it is open to Assessing Officer to either proceed under Chapter XIV-B or under section 148 against assessee - Held, yes [Para 5] [In favour of revenue]
FACTS
| ■ | The assessee constructed a building, during the relevant assessment years and had filed return of income declaring nil income. In the building constructed by the assessee, one 'M' had purchased the premises for running their own office. | |
| ■ | A search was conducted of the premises of 'M' in the course of which a fax message was seized revealing some payment made by 'M' to the assessee. | |
| ■ | The amount that was disclosed in the fax was Rs. 12.52 lakhs. On the basis thereof, it was revealed that the amount disclosed by the assessee in his return, having received from 'M', was only Rs. 4.97 lakh. | |
| ■ | In this backdrop, the Assessing Officer issued notice under section 148, reopening the assessment. Thereupon, certain additions was made in reassessment proceedings. | |
| ■ | The Commissioner (Appeals) as well as the Tribunal confirmed said addition. | |
| ■ | The assessee filed instant appeal contending that having found the evidence regarding undisclosed income during search, the only option open to the Assessing Officer was to invoke block assessment under Chapter XIV-B and, thus, impugned addition made in course of reassessment proceedings was not sustainable. |
HELD
| ■ | It is true that section 158BD states that where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132, then the books of accounts, other documents or assets seized shall be handed over to the Assessing Officer having jurisdiction over such other person and that the Assessing Officer shall proceed under section 158BC against such other person and the provisions of these Chapter shall apply accordingly. This provision by itself, is not sufficient to hold that the Assessing Officer, on the facts and in the circumstances, could not have proceeded against the assessee under Section 147 by issuing notice under section 148. | |
| ■ | Section 147 contemplates that if the Assessing Officer has reasons to believe that there is escapement of income, then notice can be issued under section 148. Section 158BD of the Act provides that if the Assessing Officer is satisfied that any undisclosed income belongs to any person other than the person with respect to whom search was made under section 132 of the Act, upon such satisfaction, is required to forward the relevant documents, papers, etc. to the Assessing Officer having jurisdiction over such other person in respect of whom the undisclosed income has been disclosed for block assessment. | |
| ■ | Thus, it is open to the Assessing Officer to proceed against the assessee, if he has reason to believe that his income has either escaped the assessment or whose undisclosed income, is unearthed during the search conducted under section 132 of the Act of the premises of some other person. | |
| ■ | From plain reading of these provisions, one does not find any impediment in proceeding against such person by issuing notice under section 148 of the Act. In other words, Chapter XIV-B does not preclude the Assessing Officer to proceed against such assessee by issuing notice under section 148. The remedies, available to the Assessing Officer, under these provisions are independent of each other, and the provisions being analoguous, it is for the Assessing Officer to opt for either of them in a situation, such as in the present case. The Legislature, has given choice to the Assessing Officer to either proceed under Chapter XIV-B or under section 148 against the assessee, such as the one in the present case. [Para 5] | |
| ■ | In the present case, the Assessing Officer reopened the case under section 147 by issuing notice under section 148 and completed the assessment. Till the assessment was completed and till the matter reached the Tribunal, the assessee did not make any grievance whatsoever. Even before the Tribunal, though the ground of jurisdiction was raised, it was not seriously pressed by the assessee and in this view of the matter, the Tribunal proceeded to consider merits of the case. | |
| ■ | In the present appeal, the appellant chose to confine its challenge only on the ground of jurisdiction and did not raise challenge on merits. In this backdrop, there is no reason to interfere with the order passed by the Tribunal. The Assessing Officer has option to proceed against the assessee by issuing notice under section 148 in a situation as occurred in the present case. [Para 6] | |
| ■ | In view of above, it is held that reassessment as made under section 147 for the relevant assessment years in the case of the assessee was valid and thus sustainable. |
CASES REFERRED TO
CIT v. Abhyudaya Builders (P.) Ltd. [2012] 340 ITR 310/20 taxmann.com 851 (All.) (para 5) and Janki Exports International v. Union of India [2005] 278 ITR 296/145 Taxman 82 (Delhi) (para 5).
S. Parthasarathi for the Appellant. K.V. Aravind for the Respondent.
JUDGMENT
Dilip B. Bhosale, J. - This Income Tax Appeal, under Section 260A of the. Income Tax Act, 1961 (for short 'the Act'), is directed against the order dated 30.05.2007 passed by the Income Tax Appellate Tribunal, Bangalore Bench-A (for short 'the Tribunal) disposing of ITA Nos. 1441-1443 of 2004 pertaining to the assessment years 1996-97, 1999-2000 and 1998-99. The Tribunal also decided other four appeals filed by the revenue by the very same order. However, we are not concerned with the same, since the order disposing of those appeals, is not the subject matter of the instant appeal. The appeals before the Tribunal were directed against the orders of Commissioner of Income Tax (Appeals) (for short, 'CIT(A)') dated 17.03.2004 arid 25.03.2004, whereby CIT(A) had partly allowed the appeals filed by the assessee. The appeals before the CIT(A) were directed against the assessment order dated 30.01.2003 passed by the Income Tax Officer, Ward-11 (2), Bangalore (for short, 'Assessing Officer').
2. This Court while admitting the appeal on 29.1.2008 formulated the following substantial question of law for consideration:
"Whether re-assessment as made under Section 147 of the Act for the relevant assessment years in the case of the appellant were valid and, thus, sustainable?"
3. Briefly stated the facts against which, the substantial question of law, as framed vide order dated 29.01.2008, arises for our consideration are that the appellant-assessee constructed a building, during the relevant assessment years and had filed return of income declaring nil income. In the building constructed by the assessee, one M/s. Monalisa Interior Decorators Private Limited (for short, 'Monalisa'), had purchased the premises for running their own office. A search was conducted of the premises of Monalisa under Section 132 of the Act on 24.12.1999. During the search, a fax message was seized revealing some payment made by Monalisa to the assessee. The amount that was disclosed in the fax was Rs. 12,52,750/-. On the basis thereof, it was revealed that the amount disclosed by the assessee in his return, having received from Monalisa, was only Rs.4,97,417/-. In this backdrop, the Assessing Officer issued notice under Section 148 of the Act, reopening the assessment for the assessment years 1996-97, 1998-99 and 1999-2000 and added the amount of Rs.37,59,689/- for the assessment year 1996-97, Rs.6,05,000/ for the assessment year 1998-99 and Rs.7,16,642/- for the assessment year 1999-2000. The Tax liability, on the basis of the additions was determined as Rs. 19,58,498/-, Rs.3,75,357/- and Rs.3,95,147/-respectively. This order was challenged by the assessee in appeals before CIT(A). The CIT(A) confirmed the order passed by the Assessing Officer insofar as these additions are concerned.
3.1 The order of the CIT(A) was then confirmed by the Tribunal. Before the Tribunal, the challenge was two fold. Firstly, on the ground of jurisdiction of reopening of the assessment by issuing notice under Section 148 of the Act, and secondly, on merits. Insofar as the first ground of challenge raised before the Tribunal is concerned, it appears from the observations made in Paragraph 2 of the order that, the said ground was not seriously pressed on behalf of the assessee. However, in the present case, the only substantial question of law raised by the assessee on which the appeal was admitted, is in respect of the jurisdiction of the Assessing Officer to reopen the assessment by issuing notice under Section 148 of the Act. No other contention or substantial question of law was urged/raised on behalf of the assessee.
4. Mr. Parthasarathy, learned Counsel appearing for the appellant-assessee, at the outset, invited our attention to Section 158BA and Section. 158BD in Chapter XIV-B of the Act to submit that the Assessing Officer had no option but to invoke the provisions contained in Chapter XIV-B of the Act to proceed against the assessee on the basis of evidence found as a result of the search made under Section 132 of the Act, of the premises of Monalisa. He submitted that it was not open to the Assessing Officer to reopen assessment under Section 147 by issuing notice under Section 148 of the Act. In short, he submitted that having found the evidence regarding undisclosed income during search, the only option open to the Assessing Officer was to invoke block assessment under Chapter XIV-B of the Act.
5. It is true that Section 158BD states that where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132, then the books of accounts, other documents or assets seized shall be handed over to the Assessing Officer having jurisdiction over such other person and that the Assessing Officer shall proceed under Section 158BC against such other person and the provisions of these Chapter shall apply accordingly. This provision by itself, in our opinion, is not sufficient to hold that the Assessing Officer, on the facts and in the circumstances, as occurred in the present case, could not have proceeded against the assessee under Section 147 by issuing notice under Section 148 of the Act. This provision fell for consideration of the Delhi High Court and the Allahabad High Court. The Allahabad High Court in CIT v. Abhyudaya Builders (P.) Ltd.[2012] 340 ITR 310/20 taxmann.com 851 was considering not only these provisions but was examining the same in the light of similar facts, as fall for our consideration in the present case. While doing so, the Allahabad High Court placed reliance upon the judgment of the Delhi High Court in Janki Exports International v. Union of India [2005] 278 ITR 296/145 Taxman 82 (Delhi) to hold that the provisions contained in Section 158BD of the Act are analogous to the provisions contained in Section 147 of the Act, insofar as the procedure that is required to be followed. Section 147 contemplates that if the Assessing Officer has reasons to believe that there is escapement of income, then notice can be issued under Section 148 of the Act. Section 158BD of the Act provides that if the Assessing officer is satisfied that any undisclosed income belongs to any person other than the person with respect to whom search was made under Section 132 of the Act, upon such satisfaction, is required to forward the relevant documents, papers, etc. to the Assessing Officer having jurisdiction over such other person in respect of whom the undisclosed income has been disclosed for block assessment. Thus, it is open to the Assessing Officer to proceed against the assessee, if he has reason to believe that his income has either escaped the assessment or whose undisclosed income is unearthed during the search conducted under Section 132 of the Act of the premises of some other person. From plain reading of these provisions, we do not find any impediment in proceeding against such person by issuing notice under Section 148 of the Act. In other words, Chapter XIV-B do not preclude the Assessing Officer to proceed against such assessee by issuing notice under Section 148 of the Act. The remedies, available to the Assessing Officer, under these provisions are independent of each other, and the provisions being analogous, it is for the Assessing Officer to opt for either of them in a situation, such as in the present case. The Legislature, in our opinion, has given choice to the Assessing Officer to either proceed under Chapter XIV-B or under Section 148 of the Act against the assessee, such as the one in the present case.
6. In the present case, the Assessing Officer reopened the case under Section 147 by issuing notice under Section 148 and completed the assessment. Till the assessment was completed and till the matter reached the Tribunal, the assessee did not make any grievance whatsoever. Even before the Tribunal, though the ground of jurisdiction was raised, it was not seriously pressed by learned counsel appearing for the assessee and in this view of the matter, the Tribunal proceeded to consider merits of the case. In the present appeal, the appellant chose to confine its challenge only on the ground of jurisdiction and did not raise challenge on merits. In this backdrop, we find no reason to interfere with the order passed by the Tribunal. We are satisfied that the Assessing Officer has option to proceed against the assessee by issuing notice under Section 148 of the Act in a situation as occurred in the present case. Hence, we answer the substantial questions of law as formulated by this Court vide order dated 29.01.2008 against the assessee and in favour of the Revenue.
7. Before we part, we observe that no other grounds were either raised or urged on behalf of the assessee. The appeal is accordingly dismissed. No costs.
SUNIL †Arising out of order of Tribunal in ITA Nos. 1441-1443 of 2004, dated 30-5-2007.
Regards,
Pawan Singla , LLB
M. No. 98258290751. There are no refund by Cheque and only e-refund will be allowed
2. Claim of TDS/TCS credit of earlier years - Hence if we don't have sufficient income we can carry forward the credit benefit.
3. CIN/LLPIN in ITR has to be filled by Company/LLP
4. Buy back of shares must be reported in the ITR by CHC
5. PAN of Debtors has to be provided if the assessee is claimed Bad debts
6. In Capital gain Computation
- Details U/s. 50 C is required to be reported
- Sale of securities by FII's
7. Gains U/s. 43CA under PGBP
8. Special income tax Return has to be shown separately
9. Payment details to Non-residents required to be reported in ITR
10. Changes in ITR5/7
- ITR 5 includes Private discretionary trust
- In ITR 7 following details has to be reported:
a. Registration No. & Registration Authority
b. Accumulation of Income details
c. Voluntary contribution like whether from foreign or anonymous
11. Additional details U/s. 36/37
12. Transactions with Cyprus has to be reported if any
Companies Act, 2013 will create requirement of company secretaries – ICSI President
CS R. Sridharan President, ICSI
"Let him who would move the world first move himself."
-Socrates
At the center of your being you have the answer; you know who you are and you know what you want."
-Lao Tzu
Dear Professional Colleagues,
The recent elections and the formation of a new government at Centre have clearly demonstrated to the world the triumph of democracy. On behalf of the members of the elite profession of company secretaries, I have immense pleasure and privilege to congratulate Shri Narendra Damodardas Modi, who assumed the august office of the Hon'ble Prime Minister of India on 26th May, 2014. The country has very high expectations from him and I am sure, he would guide the economy and the country to reach unprecedented heights. We, the professionals, must continue to act with added sense of responsibility to usher in much higher level of prosperity for the entire nation.
On 29th May, 2014, a delegation comprising of me, CS Sanjay Grover, a Council Member, CS M. S. Sahoo, Secretary and CS Sutanu Sinha, Chief Executive called on Shri Arun Jaitley, Hon'ble Union Minister for Finance, Corporate Affairs, and Defence, who happens to be an honorary member of the Institute, and offered our congratulations and best wishes to him. On the same day, the said delegation and Ms. Alka Kapoor, Joint Secretary called on Ms. Nirmala Sitharaman, Hon'ble Minister of State for Commerce & Industry (Independent Charge), Finance, and Corporate Affairs and offered our felicitations and good wishes.
"The greatest thing in the world is to know how to belong to oneself." wrote the 16th century celebrated author Michel de Montaigne. As professionals, while we render value added services based on certain known parameters, we must appreciate that each of one of us is special in our own way. We need to figure out ourselves, know ourselves truthfully and find success in ourselves. The simple fact is that if one is successful within, he will be successful on the outside as well. Our mind is our greatest asset. Much depends upon our understanding of the self. We all have a sense of the self. Whether that sense of self is positive or negative is based upon our experiences in life and our perceptions and assessment of ourselves. The self is a factual description of how you perceive yourself. If your perception is distorted, this description may not be an accurate depiction of you, but it is an accurate statement of what you believe about yourself. The concept of self is derived from self-esteem and self-efficacy. If a person has low self-esteem, the self may be skewed in the direction of a negative description.
Become addicted to continuous improvement and increase in your knowledge consistently and constantly. With time, you will inevitably become the person that you desire to be. Then you will no longer have to chase after success. Success will follow you. Your mind will become magnetized to attract success, provided you invest in yourself in terms of not only professional activities, but also the other peripherals of life or profession. Indeed, we are entering a world that increasingly rewards individual aspirations and persistence and can measure precisely who is contributing and who is not. Therefore, investing in oneself would witness the transformation which will happen in each one.
Friends, understanding and implementation of the new company law require a helping hand. The Institute has a dedicated e-mail id for receiving the operational difficulties/views relating to the Companies Act, 2013, and rules notified thereunder. We are interacting with the MCA on regular basis and getting the replies forwarded to the members. I appeal to all members to make use of this facility for their views or implementation difficulties. The Institute is constantly pursuing with MCA with respect to notifications on certain sections keeping in mind the aspirations and expectations of the members and in this regard I recently met Shri A. S. Bhatia, Joint Secretary, MCA twice. Further, representations by us are uploaded on the website of the Institute from time to time for the information of the members.
A student blossoms as a member in a solemn convocation. The Institute recently organised three convocations – one each in Eastern, Southern and Western region. I participated in all of them and witnessed the solemn oath the newly admitted members took. On 3rd May, 2014, Dr. P. Vanangamudi, Vice Chancellor, The Tamilnadu Dr. Ambedkar Law University, Chennai chaired the Convocation Ceremony of the Southern Region at Chennai. The Convocation Ceremony at Kolkata for the Eastern Region on 17th May, 2014 was presided over by Shri G. S. Gupta, Director, Emami Biotech Limited. The Convocation Ceremony for the Western Region was held on 24th May 2014 when Dr. A. K. Sengupta, Founder, Higher Education Forum was the Chief Guest. At these Convocation Ceremonies, I detailed the Institute's activities and initiatives and also the crucial role being played by the company secretaries in governance architecture.
Dissemination of activities and initiatives at all levels is a must for an Institution like us, where the stakeholders are spread across the country. On 9th May, 2014 at Bangalore I addressed a Press Conference and also met the members and students at a meeting. During these meetings, I shared with them various programmes which are on the anvil, including leveraging technology for upgrading various services being offered to the students and members and I also informed them with regard to integrated CS Course. On 20th May, 2014 at Thrissur, I participated in a Seminar on "The Companies Act: 2013 –Moving Towards Next Decade" and also interacted with the members and students at a meeting, apart from addressing a Press Conference. At the programmes of members, I highlighted the activities of the Institute and in particular emphasized the need for capacity building. At the Press Conference, I appraised the programmes of the Institute and salient features of the emerging legislative scenario with particular focus on the CS profession.
I met the members of the Bhayander Chapter on 23rd May, 2014 and interacted with them the matters of immediate concern to the profession and also the plans ahead. I visited Visakhapatnam where I addressed a Press Conference, inaugurated a Seminar and had interaction with the students and members on 27th May, 2014. At these events I briefed the highlights of the Companies Act, 2013, e-initiative of uploading the "ICSI Primer on the Companies Act, 2013" that incorporates all the major chapters of new Companies Act on YouTube, Computer Based Examination for foundation programme, modified training structure and introduction of open book examination in professional programme elective papers, etc.
I am glad to inform that the Council has implemented Guidelines for Formation, Recognition and Functioning of Study Circles, 2014 w.e.f. April 1, 2014 to provide Continuing Professional Education (CPE) for the members of the Institute. The prime objective of the Study Circles is to support the learning initiatives of the Institute. Now, we are at a crucial juncture and the capacity building is a must and we want to reach out to large section of members. Under the said guidelines, corporates including their subsidiaries, associates and joint Ventures, are also allowed to form Study Circles. Thus, seamless learning process will be available for the members to choose and update their knowledge.
I am glad to state that the Institute is launching a new PMQ Course in Competition Law at a National Seminar to be organized on the theme "Laws and Economics of Competition'' on June 13, 2014 at New Delhi. Mr. Ashok Chawla, Chairman, Competition Commission of India has kindly consented to be the Chief Guest. Eminent faculty comprising of senior functionaries from Regulators and Government and eminent professionals will address the participants. The broad coverage of the seminar includes prohibition of anticompetitive agreements, abuse of dominance, and regulation of combinations and investigation.
As you are aware, the Institute is already offering PMQ courses in Corporate Governance and Corporate Restructuring & Insolvency. Considering the present and prospective needs of the profession, it has decided to bring out e-bulletin exclusively for PMQ candidates on regular updates and the first e-bulletin had already been sent to PMQ candidates. It has also decided to offer PMQs on five specialized subjects, namely, Banking Law and Practice; Insurance Law and Practice; Capital, Commodity and Money Market; Intellectual Property Rights – Law and Practice; and International Business – Law and Practice.
As you are aware, International Professional Development Fellowship Programme, an initiative of the Institute to provide its members exposure to international services and market and opportunities of networking with their counterparts entered its ninth year. This year the Institute is organizing this Fellowship Programme covering – Bali (Indonesia), Singapore and Malaysia between 29th June, 2014 and 07th July, 2014.
The 15thNational Conference of Practicing Company Secretaries, a much awaited annual congregation of our members in practice is scheduled at The Orchid, Mumbai on June 27-28, 2014. The theme of the Conference is: "PCS: The Facilitator for Corporate Growth". The details of the conference are available on the ICSI website and also published elsewhere in this issue. I call upon all the members to register for the conference in large numbers and make it a grand success.
I once again reiterate that the Companies Act, 2013 would create a need based requirement of company secretaries in the light of its provisions such as registered valuers, interim administrators, enhanced penalties, enhanced disclosure requirements and so on, besides the mandates such as secretarial audit, certification of e-forms and other documents. I appeal to all our members to make use of the facilities and participate in capacity building programmes across the nation to learn the implementation of the Act effectively and to create further opportunities for ourselves.
Before I conclude, I once again underline the importance of healthy self-esteem which is so essential for a professional. I end with a quote from Arthur Conan Doyle: "My dear Watson, said [Sherlock Holmes]…………… To the logician all things should be seen exactly as they are, and to underestimate one's self is as much a departure from truth as to exaggerate one's own powers."
Regards,
( CS R. Sridhran ) President
president@icsi.edu
31st May, 2014
New Delhi
ICAI to take action against CAs spreading Malicious information against Institute and/ or its members
Decision of the ICAI Central Council regarding various Malicious Emails being received by ICAI and its functionaries. – (12-06-2014)
No. 1-CA(7)/165/204 – Dated 17th April, 2014
The Council of the Institute of Chartered Accountants of India (ICAI), at its 329th (Adjourned) meeting held on 4th January, 2014, while taking note of various malicious emails being circulated in various fora has decided that:
The member(s) of ICAI should not host, display, upload, modify, publish, transmit, update, forward or share any information, in any form which is harmful, harassing, defamatory, indecent, immoral or invasive of another's privacy, dignity or prestige or hateful, causing insult or injury or otherwise unlawful in any manner against the Institute and/ or its members. Further,
1. Any member of ICAI, if found spreading such information, may invite disciplinary action under the Chartered Accountants Act, 1949.
2. Besides above, ICAI may also initiate appropriate legal proceedings against such members circulating malicious emails under the applicable provisions of the Information Technology Act, 2000 or under any other law for the time being in force.
All the members of the ICAI are hereby advised to take note of the above decision of the Council.
(T. Karthikeyan)
Secretary, ICAI
Secretary, ICAI
Receipts from sale of scrap generated after demolition of building is taxable as Cap gains and not residual income
June 12, 2014[2014] 45 taxmann.com 371 (Punjab & Haryana)
IT-I : Proceeds of Malba (scrap), i.e., material left over after demolition of a structure, is taxable under head 'Capital gain', and not as 'Income from other sources'
IT-II : Where valuation of land by Tribunal for computing capital gain was based on material on record, no question of law arose from Tribunal's order
Sums collected by society for area development was for specific social purposes which couldn't be held taxable
June 12, 2014[2014] 45 taxmann.com 366 (Pune - Trib.)/[2014] 148 ITD 372 (Pune - Trib.)
IT: Where, assessee, a co-operative sugar factory, deducted certain amount from bills payable to members and non-members towards supply of sugarcane on account of 'Area Development Fund', in view of fact that said amount was impressed with an obligation to spend same for specified social purposes approved in AGM, it could not be brought to tax in assessee's hands as income
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