S.10(10):Gratuity-Applicability of benefit of gratuity & Leave encashment–Governed By definition.
[S.10AA ]
During assessment proceedings, the Assessing Officer included basic pay plus Dearness Allowance and
applied the formula as applicable to the gratuity and leave encashment for the purpose of working out the
eligible amount of gratuity and leave encashment. The CIT(A) confirmed the order of the Assessing
Officer. On appeal the Tribunal dismissed the appeal of assessee and held that the computation of the
benefit of gratuity & Leave Cash encashment as contemplated under section 10(10) & 10(AA) are to be
governed by the definition of "salary" contained in the Explanation of section 10(AA) vis-a-vis clause (h)
of Rule 2 of Part of 4th Schedule not by any agreement, as contained in 8th Bipartite Settlement on wage
revision & other similar conditions between Indian Banks Association & their workmen. The Tribunal
further held that the definition of salary is specifically covered by definition of section 10 & section
10(AA) of the IT Act. (AY. 2008-09)
Gurmit Singh .v. ITO (2013) 56 SOT 91 (Chd.)(Trib.)
Full Judgment attached
S.28(i): Business income–Income from other sources-Survey- Amount surrendered assessed as business income and set off loss is permissible. [S. 56, 133A]
No perversity had been pointed out in finding of Commissioner (Appeals) as well as Tribunal to extent that surrendered amount was an income of assessee from business and not from other sources as held by Assessing Officer. Therefore, set off was permitted against the amount of Rs. 1.75 crores surrendered during survey under s. 133A. (AY. 2003-04)
CIT v. Ram Gopal Manda (2013) 216 Taxman 95(Mag.)/89 DTR 49/261 CTR 631 (Raj.)(HC)
Full Judgment attached herewith.
S.28(i): Business loss–Loss on sale of securities shown as investment consistently in the Balance
Sheet cannot be treated as business loss. [S.45]
During the year the assessee a co-operative bank incurred loss on sale of Government securities and
debited the same in profit & loss account. The assessee claimed the said loss as business loss. During the
course of the assessment proceedings the Assessing Officer sought an explanation of the business loss
incurred by the assessee. In reply to the same the assessee explained that as per the provisions of section 6
read with section 5(b) and (c) of Banking Regulation Act, the transaction of securities forms part of the
banking business and bank can purchase and sell securities. The assessee also relied on the CBDT
Circular No. 599 dated 24/04/1991 reported in [(1991) 94 CTR 65 (St.)] wherein it was clarified that the
claim of loss on securities, if debited in the books of accounts would be given the same treatment as is
normally given to stock-in-trade. However, the Assessing Officer disallowed the claim of the assessee and
treated the loss suffered on sale of Government securities as "long-term capital loss". On appeal, the
CIT(A) reversed the order of the Assessing Officer and held that the loss suffered on sale of Government
securities is allowable as business loss only. The department carried the matter further in appeal before
the Income Tax Appellate Tribunal. The Tribunal reversed the order of the CIT(A) by holding that the
assessee consistently treats Government securities held by it as "investment" and not "stock-in-trade" and
valuing them "at cost" in its balance sheet as also in its IT return, loss from sale thereof cannot be treated
as business loss. (AY. 2007-08)
Dy.CIT v. Co-op. Bank Mehsana Ltd. (2013) 86 DTR 247/154 TTJ 522 (Ahd.)(Trib
S.28(iv): Business income–Value of benefits or perquisite-Forfeited liability–Credited to capital
account–Taxable as income.
Assessee forfeited liability of Rs. 10 lakhs and credited said amount to capital amount. This was held to
be taxed by the Assessing Officer. (AY. 2008-09) & affirmed by the Tribunal.
Krishan Murari Lal Agarwal v. DCIT (2013) 59 SOT 136 (URO) (Agra)(Trib.)
Central Excise Law - Retrospective Bungling - Reprehensible - but assessee will invariably get punished for all mistakes of babus
IT is only our Government, which has the luxury of committing mistakes in haste and correcting them at leisure retrospectively. With effect from 01.06.2006, "Parts, components and assemblies of automobiles" were included under the Third Schedule to the Central Excise Act, so as to attract the "deemed manufacturing" principle and they were simultaneously notified under Section 4A also, to attract MRP based levy of excise duty. Subsequently, the Government wanted to bring some more commodities also under the Third Schedule and also notify them under Section 4A.
The entry "Parts, components and assemblies of vehicles (including chassis fitted with engines) falling under Chapter 87 excluding vehicles falling under headings 8712, 8713, 8715 and 8716" was substituted for the earlier entry of "Parts, components and assemblies of automobiles" under Section 4A with effect from 27.02.2010.
Again with effect from 29.04.2010, the following item was also notified under Section 4A.
"Parts, components and assemblies of goods falling under tariff item 8426 41 00, headings 8427, 8429 and sub-heading 8430 10"
Notifying these items under Section 4A is a bureaucratic exercise of amending the existing notification 49/2008 CE NT.
The intention was to simultaneously place these items under Third Schedule to the Central Excise Act also, so as to subject them to the "deemed manufacturing" concept. But, somehow this was not done. The result - these items would attract MRP based levy, when "manufactured". Activities like packing, repacking, labelling, etc. would not be construed as "manufacture" for these goods. In 2011 Budget, this anomaly was sought to be rectified by retrospectively amending Third Schedule to the Central Excise Act and placing these items under the said schedule, from 27.02.2010 and 29.04.2010, respectively. But, the legislative wisdom erred and instead of placing these items under the Third Schedule to the Central Excise Act, they placed them under the non existing Third Schedule to the Central Excise Tariff Act, in Finance Act, 2011.
This mistake was rectified in Budget 2012 and these items were correctly placed under the third schedule to the Central Excise Act, with retrospective effect from 27.02.2010 and 29.04.2010 respectively.
All is well.
When "Parts, components and assemblies of automobiles" were under the third schedule and MRP levy, a doubt arose as to whether parts of items like hydraulic excavators, etc, would also be covered by these amendments. This was clarified in the negative vide CBEC'sInstructions in F.No. 167/38/2008 Dt. 16.12.2008. Further, the intention to subject these items under deemed manufacture only from 2010 is also evident from the CBEC's instructionsF.No.341/33/2011 Dt. 12.09.2011.
Despite the above, the Mumbai bench of the Hon'ble Tribunal, in the case of CCE VS JCB Limited - 2014-TIOL-09 CESTAT-MUM had held that parts of "Loader, backhoe loader, etc" would be covered from 2006 itself as parts of automobiles. Of course, the Tribunal has held that the extended period of limitation cannot be invoked in this case.
Now to the crux of the story.
TIOL is in possession of an Order passed by a Commissioner of Central Excise, confirming the demands on a major manufacturer / importer of parts of dumpers, excavators, bulldozers, etc. by treating them as parts of automobiles and confirming the demand even prior to 2010. But that is not the surprise. The Commissioner has confirmed the demand by invoking the extended period of demand, imposed equal amount of penalty and also imposed personal penalties on the executives of the company.
This is the environment in which one has to do business in India. Government can get away with whatever mistakes they do and they can rectify them retrospectively. But the poor citizens should predict everything, ignore any Circulars of the highest policy making body and still pay the tax.
DDT had extensively covered this 'retrospective' drama.
Please see:
1. On the Third Schedule: DDT 790 - 25.01.20082. Third Schedule requires rescheduling - DDT 1360 - 17.05.20103. Retrospective Bungling by CBEC - Even Parliament Not Spared - DDT 1599 - 02.05.20114. Retrospective Bungling - Discussions on Non Existing Statute - Height of Ignorance at highest Seat - DDT 1705 - 03.10.2011
In fact, based on DDT reports, a Netizen had shot off letters to the President, Prime Minister, Sonia Gandhi, Rahul Gandhi etc,.on this bungling.
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