Income tax - Whether interest on account of default in making tax payment is to be calculated with reference to date of first assessment order and not with date of an order passed in remand - YES: ITAT
By TIOL News Service
NEW DELHI, MAY 16, 2014: THE issue before the Bench is - Whether interest on account of default in making payment of Income Tax would have to be calculated with reference to the date of first assessment order and not with the date of an order passed in remand proceedings. And the verdict goes against the assessee.
Facts of the case
The assessee Company filed its return declaring huge tax free income which was earned from investments made. During the course of assessment proceedings the AO disallowed proportionate expenses attributable to these investments by applying section 14A of the Act. The CIT(A) partly allowed the appeal of the assessee. However, ITAT restored the issue to the file of AO.
The assessee Company filed its return declaring huge tax free income which was earned from investments made. During the course of assessment proceedings the AO disallowed proportionate expenses attributable to these investments by applying section 14A of the Act. The CIT(A) partly allowed the appeal of the assessee. However, ITAT restored the issue to the file of AO.
Upon completion of fresh assessment proceedings the AO recomputed the income of the assessee and charged interest under section 220(1) with effect from the first date of assessment order. Aggrieved with the order of the AO assessee filed appeal before CIT(A) who allowed the appeal.
On appeal, the ITAT held that,
++ from the facts stated above of the Vikrant's case we can understand that in that case before the Supreme Court, the assessee had paid the entire tax demanded of him at the first instance itself i.e. when the original assessment was made and demand raised, at that time itself the assessee has made the payment: and even when it was restored by an order of the appellate authority, after being quashed by a lower appellate authority, since the tax demands were fully satisfied by the assessee even at the initial stage, the assessee was held not liable to pay interest. This case is distinguishable from the case before us inasmuch as the assessee before us did not pay the tax demanded of him by the assessing officer in the year 2003. He has not paid till date the tax for the assessment year 2000-01, which was assessed by the AO. Whereas he has received a refund, when the CIT(A) partially allowed his appeal. Though the question before the Supreme Court in Vikrant case was whether the Revenue is entitled to demand interest in regard to the amount which was refunded to the assessee by virtue of the judgment of the appellate authority and which was repaid to the Revenue after decision in reference by the High Court on fresh demand notices being issued to the Assessee. Here in this case though refund was made, the fact of the matter does not in any way change that the assessee did not pay tax exigible, when the tax was demanded u/s 156 of the Act, after the original assessment order of 22nd March, 2003. In Vikrant's case it may be noted that the assessee paid tax both at the time of original assessment and also when finally High Court restored the original assessment order, then also the assessee made the payment without any default, though tax was refunded due to the order of ld CIT(A). Here that is not the case. In the case before us, the assessee did not make any payment when the first demand notice in pursuance to the assessment order was passed by AO in the year 2003, and till date the assessee has not made any payment even though, the AO, in pursuance of the Tribunal order, recomputed the tax to be levied u/s 14A. Therefore this case is distinguishable from the facts and circumstances of the Vikrant's case;
++ from the facts stated above of the Vikrant's case we can understand that in that case before the Supreme Court, the assessee had paid the entire tax demanded of him at the first instance itself i.e. when the original assessment was made and demand raised, at that time itself the assessee has made the payment: and even when it was restored by an order of the appellate authority, after being quashed by a lower appellate authority, since the tax demands were fully satisfied by the assessee even at the initial stage, the assessee was held not liable to pay interest. This case is distinguishable from the case before us inasmuch as the assessee before us did not pay the tax demanded of him by the assessing officer in the year 2003. He has not paid till date the tax for the assessment year 2000-01, which was assessed by the AO. Whereas he has received a refund, when the CIT(A) partially allowed his appeal. Though the question before the Supreme Court in Vikrant case was whether the Revenue is entitled to demand interest in regard to the amount which was refunded to the assessee by virtue of the judgment of the appellate authority and which was repaid to the Revenue after decision in reference by the High Court on fresh demand notices being issued to the Assessee. Here in this case though refund was made, the fact of the matter does not in any way change that the assessee did not pay tax exigible, when the tax was demanded u/s 156 of the Act, after the original assessment order of 22nd March, 2003. In Vikrant's case it may be noted that the assessee paid tax both at the time of original assessment and also when finally High Court restored the original assessment order, then also the assessee made the payment without any default, though tax was refunded due to the order of ld CIT(A). Here that is not the case. In the case before us, the assessee did not make any payment when the first demand notice in pursuance to the assessment order was passed by AO in the year 2003, and till date the assessee has not made any payment even though, the AO, in pursuance of the Tribunal order, recomputed the tax to be levied u/s 14A. Therefore this case is distinguishable from the facts and circumstances of the Vikrant's case;
++ in our opinion this decision squarely covers, the issue, before us. In view of above discussion assessee was required to pay interest u/s 220(2) as it had not initially satisfied the demand raised in 2003. We are in agreement with ld. counsel for the assessee that interest on refund is to be charged from the date of grant of refund. The assessee has given computation at page 64 and 65 of its paper book which may be considered by AO while computing the interest leviable u/s 220(2).
Denial of S. 10B deduction to 100% EOU set up under STP scheme- Not so confident view from Delhi High Court complicates situation further- Whether it is fair to deny deduction for mere procedural lapse?
Explanation to section 10B of the Act in the context of allowance of section 10B deduction defines qualifying 100% EOU as under:
"(i) hundred per cent export oriented 'undertaking' means an undertaking which has been approved as a hundred per cent export-oriented undertaking by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 (65 of 1951), and the rules made under the Act."
100% EOUs are also set in STP zones but in their case the approval is tendered by the Director STPI on behalf of IMSC. In a recent decision in twin cases of CIT v. Regency Creations Ltd. and CIT v. Valiant Communications Ltd. (2012) 79DTR (Del) 24 the Delhi High Court held that mere approval for the purpose of STP does not entitle the unit to benefit under section 10B in the absence of any notification or official document that suggests that either the IMSC or any other officer or agency was nominated to perform the duties of the Board ( constituted under s. 14 of the IDAR Act) for the purposes of approval under section 10B.
The Delhi High Court did not have the benefit of reading of the handbook of procedures to FTA which states that IMSC approval to EOU in STPI will hold good for all purposes.
No addition of unexplained sums if it was duly explained by assessee in absence of any response from third parties
IT : In a case of purchase of shares on credit, assessee's obligation stood discharged under section 69A if he furnished details of cheques, details of banks and addresses of sellers of shares
Provisions for Related Party Transactions
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The Government has issued a Circular on 17th July, 2014 on matters relating to related party transactions under the Companies Act, 2013 (Act) and rules made thereunder.
The Circular, inter-alia, clarifies that the term 'related party' appearing in the second proviso to section 188(1) of the Companies Act, 2013 refers only to such related parties as may be related party in the context of the contract or arrangement for which the relevant special resolution is being passed. It has also been clarified that contracts entered into by companies, after complying with section 297 of the Companies Act, 1956, before commencement of section 188 of the Companies Act, 2013 will not require fresh approval under the latter provision till the expiry of original term of such contracts. The Circular also clarifies that transactions arising out of compromise, arrangements and amalgamations dealt with under specific provisions of the Companies Act, 1956 or Companies Act, 2013 would not attract the provisions of section 188 of the Companies Act, 2013.
This information was given by Smt. Nirmala Sitharaman, MoS in the Ministry of Corporate Affairs in written reply to a question in the Lok Sabha today.
MCA includes Slum area development in CSR activities
MCA has vide its Circular dated 06.08.2014 included slum area development in Activities which may be included by companies in their Corporate Social Responsibility Policies by inserting clause (xi) in Schedule VII of Companies Act, 2013.
Government of India
Ministry of Corporate Affairs
Notification
New Delhi, dated, the 06th August, 2014
G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 467 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following further amendments in Schedule VII of the said Act, namely:-
(1) In Schedule VII, after item (x), the following item and entry shall be inserted, namely:-
"(xi) slum area development.
Explanation.- For the purposes of this item, the term `slum area' shall mean any area declared as such by the Central Government or any State Government or any other competent authority under any law for the time being in force."
2. This notification shall come into force on the date of its publication in the Official Gazette.
[File Number 1/18/2013-CL-V]
(Amardeep S. Bhatia)
Joint Secretary to the Government of India
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