CBDT revises jurisdictions of DGITs / DITs of Intelligence & Criminal Investigation wing
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(Department of Revenue)
CENTRAL BOARD OF DIRECT TAXES
(Income-tax)
MINISTRY OF FINANCE
(Department of Revenue)
CENTRAL BOARD OF DIRECT TAXES
(Income-tax)
NOTIFICATION NO. 77/2014
Dated 10th December, 2014
S.0…………………………… (E) In exercise of the powers conferred by sub-sections (1) and (2) of section 120 of the Income-tax Act, 1961 ( 43 of 1961) and in supersession of the notification of the Government of India, Central Board of Direct Taxes number S.O.1942(E), dated the 19th August, 2011 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii) dated the 19th August, 2011, except as respects things done or omitted to be done before such supersession, the Central Board of Direct Taxes hereby, -
(i) directs that the Director General of Income-tax (Intelligent and Criminal Investigation), New Delhi, specified in column (2) of the Schedule-I annexed to this notification, having his headquarters at the plaCe specified in the corresponding entries in column (3) of the said Schedule, shall exercise powers and perform functions in respect of such territorial areas or such persons or classes of persons or such incomes or classes of incomes or such cases or classes of cases, in respect of which the Directors of Income-tax specified in column (4) of the said Schedule are having jurisdiction;
(ii) directs that the Director(s) of Income-tax specified in column (2) of the Schedule-II annexed to the notification, having their headquarters at the places specified in the corresponding entry in column (3) of the Schedule-II, shall exercise powers and perform functions specified in column (5) of the Schedule-II in respect of the territorial areas specified in corresponding entry of column (4) of the aforesaid Schedule-II;
(iii) authorises the Director General of Income-tax (Intelligence and Criminal Investigation) specified in column (2) of Schedule-I or Director(s) of Income-tax (Intelligence and Criminal Investigation) specified in column (2) of Schedule-II in this Notification to issue orders in writing to the Income-tax authorities subordination to them for the exercise of such powers and functions specified in column (5) of the Schedule-II, in respect cif territorial areas under their jurisdiction;
AHMEDABAD, DEC 12, 2014: THE issue before the Bench is - Whether when assessee engaged in trading of shares incurs expenses on unsecured loan and utilises same for buying shares for investment, such expenses are allowable as per Sec 36(1)(iii). YES is the answer.
Facts of the case
The assessee concern was dealing in trading of shares. It was depicted in the order of Tribunal that as per clauses of memorandum, the company was authorised for investment and dealing. Clause-43, though entitles the assessee to carry on all that activities, does not mean it can carry on business or acquiring shares for the purpose of carrying the business. Its expenses were debited by the entry in the accounts and other attempting balances. Balance Sheet shows "Long Term Investment" and not "Stock-in-Trade". The Company for which the shares were acquired was a BIFR Company, the shares of which were hardly tradable. The assessee own version that intention was to acquire the company through BIFR shows that it was not with an intention to carry on business, nor to acquire the shares, but to acquire the company through BIFR. All these show that it was an activity other than business carried on by the assessee. On the facts and circumstances of the case, it was observed that it was an adventure in the nature of trade. Tribunal accordingly, vacate the order of the CIT(A) and restore that of the AO.
Before HC, assessee's counsel had relied on the decision of the SC in the case of DCIT vs. Core Health Care Ltd., 2008-TIOL-17-SC-IT, wherein, it was held that the assessee was entitled to deduction u/s 36(1)(iii) prior to its amendment by the Finance Act, 2003, in relation to money borrowed for purchase of machinery even though the assessee had not used the machinery in the year of borrowing. On the other hand, Revenue's counsel had contended that in view of section 43 and the observation made by the Tribunal in its order and in view of the decision of the Bombay High Court in the case of Crescent Organics (P.) Ltd. v. DCIT, Range-8(1), Mumbai 2014-TIOL-1263-HC-MUM-IT, the view taken by the Tribunal was just and proper.
Held that,
++ the CIT(A), while considering the issue, has given detailed reasons in para-3.2, in which it was observed that "I find that there is sufficient force in the contention put forth by the Authorised Representative of the appellant. The Supreme Court in the case of Madhav Prasad Jatia v. CIT 2002-TIOL-987-SC-IT, has held that at the time of allowing interest u/s 36, three conditions are required to be seen for allowing deduction in respect of the borrowed funds for the purpose of business. a) Capital should be borrowed by the assessee b) It must be borrowed for the purpose of business c) Interest must have been paid. In the instant case the appellant company has fulfilled all the above conditions. Further in the case of CIT vs. Rajiv Lochan Kanoria reported in 208 ITR 616, the Calcutta High Court has also observed that it is immaterial whether the borrowing is for the purpose of acquiring a capital asset or stock-in- trade. In the instant case the appellant has incurred interest expenditure in respect of unsecured loan taken from a body corporate and have been utilised for the purpose of acquisition of shares of India Polyfibres Ltd on which no dividend has been received. Further, the appellant company has also offered the interest income received on the investments made during the year as business income. The appellant company is engaged in the business of trading in shares and the interest payments are for the business purpose only. Therefore, I am of the view, that the expenditure relatable to such an investment is allowable business expenditure u/s 36(1)(iii). Having considered the facts of the case, I am of the view, that there is no justification for the disallowance made by the AO. The addition made by the Assessing Officer of Rs. 6,75,254/- is therefore deleted". Thus the CIT(A) has after discussing the law as well as facts, has come to the conclusion that the appeal deserves to be allowed and investment is allowable business expenditure under sec. 36(1)(iii);
++ however, the Tribunal, while considering the appeal has not given cogent reasons and has summarily allowed the appeal. In our view, since no detailed reasons are given by the Tribunal, the matter is required to be remitted back to the Tribunal for fresh consideration and the order passed by the Tribunal is required to be quashed and set. In that view of the matter, the order passed by the Tribunal is quashed and set aside. The matter is remitted back to the Tribunal for afresh consideration on all other aspects. This Tax Appeal is disposed of accordingly.
PAN doesn't disclose real identity of an individual;SLP dismissed against sec. 68 additions
December 12, 2014[2014] 51 taxmann.com 387 (SC)
IT : Where false evidence had been adduced by assessee to give colour of genuineness to bogus entries through bank accounts and deposits which were mostly by cash, Assessing Officer was justified in making addition under section 68
IT : PANs are issued without de facto verification, these cannot solely divulge real identity of individual
The Hon'ble High Court of Delhi in the case of Travelite (India) Vs. Union of India & Ors. [W.P. (C) 3774/2013, C.M. No. 7065/2013](the Travelite case) while holding Rule 5A(2) of theService Tax Rules, 1994 (the Service Tax Rules) as ultra vires the provisions of the Finance Act, 1994 (the Finance Act), clearly held that "No Service Tax Audit can be conducted by the Department and only Special Audit within the Statute as mentioned under Section 72A of the Finance Act can be done either by a Chartered Accountant or Cost Accountant only in specified certain circumstances". It was further held that Service Tax Audit as envisaged in Rule 5A(2) of the Service Tax Rules does not have appropriate statutory backing.
Even, the Hon'ble Allahabad High Court in the case of ACL Education Centre Pvt. Ltd. & Ors. Vs. Union of India [2014-TIOL-120-HC-ALL-ST] has held that the Audit under Service tax is to be conducted by Chartered Accountants/ Cost Accountants only and not by officers of the Department.
Further, the Hon'ble Calcutta High Court in the case of SKP Securities Ltd. Vs. DD (RA-IDT) & Ors. [2013-TIOL-38-HC-KOL-ST] has also held that no Audit of private assessee can be undertaken by CAG under Rule 5A(2) of the Service Tax Rules.
Thereafter, in the background of the Travelite case, the Central Board of Excise and Customs (CBEC or the Board) vide Circular No. 986/10/2014-CX dated October 9, 2014had clarified that judgment under the Travelite case does not deal with the issue of audit in the Central Excise. It was further clarified that there is adequate statutory backing for Audit by the Central Excise officers by virtue of Section 37(2)(x) of the Central Excise Act, 1944 and Rule 22 of the Central Excise Rules, 2002 for conducting Central Excise Audit.
Recently, the Central Government vide Notification No. 23/2014-ST dated December 5, 2014 (Notification No. 23) had substituted Rule 5A(2) of the Service Tax Rules, thereby nominating a Chartered Accountant or a Cost Accountant along with an officer authorised by the Commissioner or the Audit Party deputed by the Commissioner or CAG to conduct Service Tax Audit. Further, the time limit of 15 days for making available the requisite documents by the Assessee was dispensed with.
Clarification by the CBEC:
The Board vide Circular No. 181/7/2014-ST dated December 10, 2014 (the Circular) has tried to remove the mist surrounding the power of the Departmental officers to conduct Service Tax Audit and had clarified that Rule 5A(2) of the Service Tax Rules, interalia, provides for scrutiny of records by an officer authorised by the Commissioner or the Audit Party deputed by the Commissioner or CAG and such scrutiny essentially constitutes Audit by the Audit Party consisting of the Departmental officers.
It has been further clarified that Rule 5A(2) of the Service Tax Rules has appropriate statutory backing for conducting Service Tax Audit by the Departmental officers by virtue of Section 94(2)(k) of the Finance Act as amended by Section 114(J) of the Finance Act, 2014 w.e.f. August 6, 2014 which reads as under:
"(k) Imposition, on persons liable to pay service tax, for the proper levy and collection of tax, of duty of furnishing information, keeping records and the manner in which such records shall be verified."
Furthermore, it has been clarified that the expression "verified" used in Section 94(2)(k) of the Finance Act is of wide import and would include within its scope, Audit by the Departmental officers, as the procedure prescribed for Audit is essentially a procedure for verification mandated in the Statute.
Therefore, the judgment of the Hon'ble High Court of Delhi in the Travelite case has now been refuted by the Board by way of amendment made under Rule 5A(2) of the Service Tax Rules by virtue of power derived under Section 94(2)(k) of the Finance Act, as the Service Tax Audit can be conducted by the Departmental officers as well.
But, following open questions are not answered in the Circular and requires attention of the Board for the clarification at the earliest:
- Whether the amendment made in Rule 5A(2) of the Service Tax Rules vide Notification No. 23 are effective only w.e.f December 5, 2014 for the Departmental officers to conduct the Service Tax Audit?
- What would be legal fate of Service Tax Audits initiated/ conducted prior to August 6, 2014, can it be declared as void in the light of the Travelite case?
No reassessment deeming exp. on software capital in nature when assessee had disclosed that it was an annual exp.
December 12, 2014[2014] 52 taxmann.com 44 (Mumbai - Trib.)/[2014] 34 ITR(T) 119 (Mumbai - Trib.)
IT : Where expenditure on software charges was an annual expenditure and such fact had been disclosed by assessee, reopening of assessment on ground that said expenditure was of enduring nature was unjustified
Mere disallowance of exp. won't attract concealment penalty if assessee had made claim under bona fide belief
December 12, 2014[2014] 51 taxmann.com 463 (Chandigarh - Trib.)/[2014] 32 ITR(T) 668 (Chandigarh - Trib.)
IT : Expenditure claimed for establishing airport being disallowed as not related to business of development authority, no concealment penalty could be levied
IT : Where taxability of instalment amounts received on sale of flat as a result of change of accounting method was remitted to Assessing Officer for de novo consideration, concealment penalty was to be deleted
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