The Income Tax Appellate Tribunal, Vishakhapatnam bench comprising of Judicial Member V Durga Rao and Accountant Member D.S Sunder Singh in its recent order ruled that the provisions of tax deduction at source are not applicable to supply contracts made along with a works contract.
The assesse company entered into two agreements with M/s Bharat Heavy Electricals Limited (BHEL) for indigenous supply and services. According to the assessee, the first contract is for the supply of the machinery and second contract is for commissioning of equipment and both are independent contracts but not interdependent.
They claimed that the first contract constitutes purchases and the provisions of TDS is not applicable whereas the contrat-II is works contract and the TDS was made.
However, AO rejected the claim and said that the works contract covered by the two agreements are nothing but composite contracts for supply and erection of the machinery, interdependent and falls within the purview of chapter XVVIIB for deduction of tax at source. Accordingly, he charged interest u/s 201 & 201(1A) of the Act for non-deduction of tax at source.
Aggrieved assessee went for an appeal before CIT (A) wherein the CIT (A) held that both the contracts are independent; contract no 1 as supply contract and the other one as work contract. So the appellate authority ruled that the assessee required to deduct tax at source on the works contract i.e. contract no. (ii) And assessee need not require to deduct tax at source on the supply contract.
Aggrieved by the order of the CIT (A), the approached the Income Tax Appellate Tribunal.
Dismissing the appeal, the bench held that it is not possible to come to conclusion that due to services required to be rendered under contract no. (ii), the terms of the contract no. (i) Would be in the nature of works contract. The Ld. DR did not bring any other evidence to show that the finding given by the Ld. CIT (A) is incorrect and also did not place any other decision to support the view of the department.
Subscribe Taxscan Premium to view the JudgmentThe Karnataka High Court, while considering a series of petitions filed by the dealers under the Karnataka Value Added Tax, 2003, ruled that under the new amnesty scheme of the Karnataka Government, i.e, ‘Karasamadhana’ Scheme, the amounts paid the dealers during the pendency of the concerned appeals shall be first appropriated towards the tax arrears first.
The scheme was announced by the Chief Minister of Karnataka while presenting his state budget speech for the year 2017-18 with a view to help the dealers and companies to clear all pending dues of taxes so as to shift to the new GST system with a clean slate.
Under this scheme, the dealers were allowed to clear their dues from earlier taxes. They had to pay only 10 % of the interest along with the principal tax assessed by the authorities. Under the scheme, the cases and appeals before various courts and tribunals were also to be withdrawn to avoid litigations. However, the money many companies deposited as deposit while challenging tax assessments was appropriated by the authorities against the interest and against the tax amount. This made them pay more tax, interest and penalty.
Aggrieved by the action of the department, Companies such as Castrol India Ltd, WS Retail, Nokia India etc. approached the High Court through a writ petition.
Before the High Court, the petitioners contended that the ‘adjustment’ during the pendency of the appeals etc., which were required to be withdrawn by the Dealers first should have been made first against the arrears of ‘tax’ as per the adjudication orders and the balance amount of tax and 10% of interest and penalty as per the adjudication order was only required to be paid by them to avail the benefit of ‘KSS 2017’.
The Department, on the other hand, contended that under Section 42(6) of the KVAT Act, 2003, they are entitled to adjust these payments or deposits subject to appeals against the outstanding ‘interest’ amount first and only the balance amount can be adjusted against the tax or penalty parts of the total demand raised by the Assessing Authority.
Justice Vineet Kothari, while disposing of the appeals in favour of the petitioners stated that the object of the scheme was to pave the way and to provide the clean slate for the new indirect regime of GST. The Court opined that the provisions of the scheme should be interpreted in favour of the tax payers as per the well settled provisions of interpretation applicable to the taxing statues namely that the benefit of doubt or benefit in case of two views being possible, the one which is more favourable to the Dealers has to be adopted by the Courts.
“Viewed from this angle and few of the propositions laid down for interpreting similar Schemes even under the Income Tax Act, and VAT or other Tax laws, it clearly appears to this Court that the stand of the Respondents-Department in the present cases, is incongruous and unsustainable and the same defeats the purpose of the Scheme for the Dealers, who voluntarily opted for the same giving up their valuable rights of disputing the entire liability as per the adjudication orders passed by the Assessing Authorities and putting an end to the litigation and paying the remaining arrears of tax, interest and penalty as per the provisions of the Scheme and thus giving finality to the dispute and achieving the twin purposes of the Scheme itself,” the Court said.
The petitions were allowed by the Court by directing the department to re-compute the arrears of tax, interest and penalty.
Subscribe Taxscan Premium to view the JudgmentShri Injeti Srinivas, the current Secretary, Ministry of Corporate Affairs is appointed as Part Time Member of the Securities and Exchange Board of India (SEBI) with immediate effect and until further orders.
Last October, Shri. Injeti Srinivas, A 1983 batch IAS officer from Odisha cadre, had replaced Tapan Ray as as secretary at the corporate affairs ministry.
He was in charge at a time when the ministry has stepped up the crackdown on shell companies as part of larger efforts to curb illicit fund flows.
Earlier, Srinivas was secretary at the Department of Sports as well as Director General of Sports Authority of India (SAI).
Subscribe Taxscan Premium to view the JudgmentThe New Delhi bench of Income Tax Appellate Tribunal on yesterday ruled that the amount received as subsidy from the State Government under ‘Capital Investment subsidy’ is not taxable under the Income Tax Act as it is ‘capital’ in nature.
The bench including Vice President Shri.R.S Syal and Judicial Member Smt.Beena Pillai were held so while dismissing the appeal of revenue.
In the instant case, the assessee declared receipt of Rs.2.5 crore as capital in nature, being, the amount of subsidy from West Bengal Government under West Bengal Incentive Scheme 2000. The assessee maintained that the same was ‘Capital Investment subsidy’ given to incentivize the setting up of units in West Bengal and, hence, not revenue receipt. The AO, however, treated the amount as revenue receipt and demanded tax.
The CIT (A) reversed the order in appeal. Aggrieved, the Revenue carried the matter to the tribunal and the tribunal admitted the fact that the given amount of subsidy for setting up of unit in West Bengal and the same has been characterized as `Capital investment subsidy’.
The Tribunal, noticed that the Apex Court, in Sahney Steel and Press Works vs. CIT (1997) 228 ITR 253 (SC), has held that the operational subsidy which is received after commencing the business is taxable income.
Following the above decision, the Tribunal held that an admitted position that the assessee received this amount as a quid pro quo for setting up of its unit in West Bengal. The same, being, allowed for setting up of industry has been rightly held by the CIT (A) to be capital receipt.
Subscribe Taxscan Premium to view the JudgmentA division bench of Madras High Court recently invalidated an assessment order against M/s.Cairn India Ltd.
The primary object of the Assessee is to carry on exploration and production of oil and gas in India. For this purpose, it had acquired participating interest in various oil and gas blocks.
As part of its activities, the assessee entered into various Production Sharing Contract, Joint Operating Agreement and Unincorporated Joint Venture Agreements with other entities joint venturers.
For the year under consideration, the department asked the assessee to justify the claim for deduction made under Section 80IB of the Income Tax Act 1961. Later, assessment was passed against the assessee making additions under various heads.
Assessee, being failed to secure relief from the ITAT, approached the High Court.
While answering most of the questions in favour of the assessee, the division bench comprising of Justices Rajiv Shakhder and R. Suresh Kumar observed that adequate opportunity was not given to the Assessee to rebut the concerns and/or underlying materials on the basis of which the additions are made.
“As noted by the Tribunal and also by us, the relevant material required for claiming deduction under Section 80IB had been placed on record by the Assessee before the Assessing Officer. The only reason that the DIT and the Tribunal came to the conclusion that the assessment order was erroneous and prejudicial to the interest of the Revenue, was, that, according to them, the Assessing Officer had not applied his mind to the materials placed on record by the Assessee. In so far as the Assessee was concerned, it claimed that it had worked out the deduction in accordance with the provisions of Section 80IB(13) of the 1961 Act, which, in turn, referred to sub-section (7) to (12) of Section 80IA of the very same Act,” the bench said.
Subscribe Taxscan Premium to view the JudgmentThe Cabinet Committee on Parliamentary Affairs (CCPA) today recommended convening of Winter Session of Parliament this year from December 15, 2017 to January 5, 2018, subject to exigencies of government business. This was informed by the Minister of Parliamentary Affairs Shri Ananthkumar to media persons after the meeting of CCPA.
Shri Ananthkumar further stated that the ensuing Winter Session will have a total of 14 sittings over a duration of 22 days.
The meeting was chaired by Union Minister for Home Affairs Rajnath Singh to discuss legislative agenda for the coming session of Parliament.
Talking to media persons, Ananthkumar noted that it is not unprecedented that the schedule of the Parliament Session has been decided so as to avoid any overlap with the Assembly Elections in the States. This practice has been followed on many occasions by different Governments in the past. Shri Ananthkumar appealed to all Political Parties for fruitful and constructive discussions on important Bills and ensure smooth functioning of both the Houses of the Parliament.
Answering a question on Triple Talaq & the National Commission for Backward Classes, Shri Ananthkumar stated that it is a strong desire of the people of India that Parliament should legislate on these two important issues and the Government is committed to respond to this desire.
Three Bills are to be taken up in the coming Winter session to replace three Ordinances viz.,
Parliament will also discuss the Supplementary Demands for Grants in this Winter Session.
While deleting penalty proceedings under Section 271C of the Income Tax Act initiated by the department, the ITAT held that there was reasonable cause for not deducting tax and therefore, the levy is not justifiable.
The assessee, during the year under consideration, made payments of Lease rent and Interest to Yamuna Expressway Industrial Development Authority (YEIDA) without deduction of tax at source u/s 194I of the Income Tax Act. Consequently, the department initiated penalty against the assessee.
Assessee was given some land on lease for a period of 90 years. The assessee was free to make any construction on such land. Annual lease rent was paid for such land, for which assessee believed that no tax is deductible under section 194I. However, the Delhi High Court concluded the matter against the assessee and held that the payment is subject to TDS.
Section 273B of the Act provides that in case of a reasonable cause, penalty otherwise exigible, inter alia, u/s 271C of the Act, cannot be imposed.
Granting relief to the assessee, the division bench held that “When we advert to the facts of the instant case, being – no deduction of tax at source made prior to the year of survey on 24.02.2014; no other order against the assessee requiring deduction of tax at source at that time when the assessee made payment of lease rental; and the judgment of the Hon’ble Delhi High Court delivered only on 16.02.2017 casting obligation for making deduction of tax at source -, it becomes abundantly clear that the assessee entertained a bona fide belief that no tax withholding was required on lease rent payments. This belief, being a reasonable cause, for non-deduction of tax at source in respect of lease rent payment, magnetizes the provisions of section 273B.”
Subscribe Taxscan Premium to view the JudgmentThe Supreme Court, on Friday, questioned the maintainability of the petition filed by CPI Leader Binoy Viswam challenging the provisions of section 139AA of the Income Tax Act mandating linking of Aadhaar with PAN number and for filing income tax returns.
The petition was later withdrawn by the counsel appeared on behalf of the petitioner.
The top court said it had already upheld the validity of an Income Tax Act provision making Aadhaar mandatory for the allotment of permanent account number (PAN) and filing of tax returns in its judgment delivered in June this year.
“How this petition is maintainable now? We had upheld the vires (of the provision). Now, a judgement on right to privacy has come but there is no judgment on Aadhaar. How this petition has been filed?,” a bench comprising Justices A K Sikri and Ashok Bhushan asked.
The bench, however, granted the petitioner the liberty to file an application for intervention in the main Aadhaar matter which is scheduled to come up for hearing before a Constitution bench in the last week of this month.
Meanwhile, the apex court today also refused to hear a separate petition which had challenged the linking of Aadhaar with bank accounts. The court said it cannot hear several petitions raising similar issue and asked the petitioner to move an application for intervention in the main Aadhaar matter.
Advocate Sriram Parakkat, the counsel for the petitioner told to Taxscan that “It was an unpleasant surprise that the second writ petition titled Benoy Viswom v Union of India was not entertained. In its’ earlier judgment, it was specifically held that the challenge to Section 139 AA has only been examined in premise of violation of Articles 14 and 19 (1) g of the Constitution and the challenge under Article 21 largely depended on whether privacy was indeed a fundamental right or not. Under a changed circumstance, when a 9 Judge Bench of the Supreme Court categorically held that privacy was a fundamental right, it was legitimately expected that the part of the challenge to the provision under Article 21 for violation of the right to privacy would come alive.
Besides, as regards confirming of Section 139 AA on Articles 14 and 19 (1) g is concerned, a Five Judge Bench in Shaira Bhanu (the tripple talaaq judgement) had expressly overruled the decision in writ petition 247 ( Benoy Viswom v UOI). Whether this overruling is a Majority view or a Minority view in the Shaira Bhanu judgement is definitely an issue. But that also could have been adjudicated keeping the challenge to section 139 AA alive.”
“The resultant tragedy is that 139 AA remains in the statute books with hollow foundation stones laid down by the judgement in Benoy Viswom v Union of India which on the one hand has been expressly overruled by a 5 Judge Bench and on the other hand has left open the tested on Article 21 (which J Khanna famously said was the basic repository of all rights). What’s the meaning of the right to privacy when you are threatened with invalidation of PAN card and consequent civil death if you do not link pan with adhaar. The statute forces citizens to enrol for a scheme (Adhaar) which itself is to be tested by a Constitution Bench of the Supreme Court thereby rendering the Constitution Bench Judgement infructous through an Act of Parliament. And even the paragraph on partial stay in Benoy Viswom v UOI has to be re-worded in the post 9 Judge Bench scenario as it was supposed to operate only till the decision is arrived at by the 9 Judge Bench,” he added.
Subscribe Taxscan Premium to view the JudgmentHyderabad bench of Income Tax Appellate Tribunal (ITAT) has held that rent received during eviction of tenants on a property purchased for setting up of project is not taxable as ”income from house property” under the provisions of the Income Tax Act, 1961 as the same constitute “capital receipt”.
Assessee in the instant case is a company incorporated for the purpose of development and construction of a commercial complex and filed its returns during the assessment year declared the total income of Rs. 1,66,630. The main issue in this case is whether the rental income received during the period of project completion is taxable or not, and if so under what head.
During the course of assessment proceedings the Assessing Officer (AO) noted that the assessee has credited the work-in-progress account with various amounts totaling to Rs. 24,99,733 and also noticed that the assessee has taken a contrary stand as the rental income from one party was offered as ‘income from house property’ but did not include another party.
The assessee contended that they were purchased the property from another two companies and an individual for setting up an industrial park. These properties were tenanted at the time of registration of the property and the company has spent a lot of money for evicting them. During these proceedings the company received rentals from the tenants. The rentals were collected in course of evicting the tenants; hence they were credited to work-in- progress account as “capital receipts”. But the AO was of the opinion that the rent received should be treated under the head ‘income from other sources’ and accordingly he assessed the amounts under the said head.
The Tribunal bench of Accountant Member B. Ramakotaiah has observed that while getting vacant pocession for completing the project the assessee had taken steps to evict tenants and also paid compensation to them. And the rental receipts received by the assessee during the period have to be set off to the cost of project. So the receipts are to be considered as capital receipts only. Hence it cannot be treated under the head ‘income from other sources’ and the assessee has rightly treated them as ‘capital receipts’ and also set off to work-in-progress.
The bench further relied up on the decisions by the Honorable Supreme Court in similar issues, the bench has declared that rent received during eviction of tenants on a property purchased for setting up of project is not taxable.
Subscribe Taxscan Premium to view the JudgmentThe Kerala State Finance Minister Thomas Isaac has recently asked all the local bodies to depute an officer or Financial Expert to become GST compliant, besides issuing guidelines on the incidence of Goods and Services Tax (GST) on various public works undertaken by them.
For this purpose, each local body should take separate GST registration in the name of their respective secretaries. The government directed the local bodies to make relevant entries regarding to all sale, purchase, and net payments and file these on the GST portal promptly.
The GST amount will be deposited by the respective local body secretary within five working days. When the officials miscalculated or wrongly filed the GST returns would be penalised.
The State government has notified the GST rates for some of the construction materials such as cement, tiles, solid blocks, paint, and glass in the 28% slab, bitumen, steel, timber, and PVC pipes in the 18% slab, and broken stone (aggregate) and soil in the 5% slab.
Under the new GST regime, all the indirect taxes such as Excise duty, Service Tax, sales tax, VAT, luxury tax, entry tax etc. prevailed in India was subsumed.
Sales made by the local bodies will attract GST as per the notified rates. The services which are provided by the local bodies are tax free. However, GST will be levied on the rent component of shopping complexes and auditoriums. The fee paid for building permits or regularisation of construction under the Kerala Building Rules is also exempted from GST.
The Bombay High Court in its recent judgment held that income tax cannot be levied on compensation received by Parle for settlement for loss of its bottling rights with Coca Cola Company.
The division bench comprising of Justice Dharmadhikari and Justice Prakash D.Naik were held so while dismissing a departmental appeal against M/s. Parle Bottling Pvt. Ltd.
Assessee, a private company was engaged in the business of manufacturing, bottling and distribution of soft drinks and beverages under several popular brands. During the relevant assessment year, the assesse had shown a sum of Rs.16.05 crores to be a capital receipt not liable to tax and was declared in the accounts as a capital reserve after deducting Rs.10 lakhs for professional fees paid.
Assesse claimed that the aforesaid amount was received as compensation of a settlement for loss of its bottling rights with Coca Cola Company, USA.
During the course of assessment, the AO noted that the payment was made for settlement of dispute between the Coca Cola Company, USA and the respondent assessee. Accordingly AO held that the amount partakes the character of income in terms of section 2(24) of the Act and to be taxed as income from other sources.
The aggrieved assessee went appeal before commissioner to set aside the issue. The commissioner was held that the receipt was taxable as capital gains since section 55(2) (a) covers such a situation as that of the respondent assessee. Aggrieved with the order of commissioner the assessee preferred a further appeal before the tribunal.
Referring the master agreement with Coca Cola Company of September, 1993 wherein the transfer of intellectual property rights in the nature of trademarks, knowhow, franchisee rights etc. in respect of various brands of beverages/soft drinks owned by the Parle Group was explained, the Tribunal held that there was a clear indication regarding the formation of Bangalore subsidiary and this subsidiary would be given the bottling rights. The Tribunal also added respondent company was entitled to receive compensation for breach of the right of first refusal from Coca Cola Company.
Tribunal, therefore, concluded that the assessee has lost the source of its business or trading activity. The compensation received was a capital receipt that was not taxable. It is this order of the Tribunal which is challenged in this appeal.
The division bench dismissed both the appeal of revenue and restored the judgment of tribunal infavour of respondent assessee and relied upon the order of identical issues.
The bench upheld the finding of the Tribunal that the sale proceeds on a capital assets cannot be held to be a revenue receipt and after the sale, the block of assets have been reduced and accordingly whatever is there in the block of assets, deprecation has to be allowed in accordance with the provisions of law.
Subscribe Taxscan Premium to view the JudgmentIn a section of the media, it has appeared that there is a possibility that the Central Government may withdraw bank cheque book facility in the near future, with an intent to encourage digital transactions. It is denied that there is any proposal under consideration of the Government to withdraw bank cheque book facility.
In this regard, it is emphasized that while the Government is committed to transform India into a less cash economy and promote digital and electronic transactions through multi-pronged initiatives, cheques are an integral part of the payments landscape, and form the backbone of trade and commerce, by being negotiable instruments, which often serve as the security for underlying trade transactions.
In fact, the Union Finance Minister, in the Budget Speech 2017-18, had announced, “As we move faster on the path of digital transactions and cheque payments, we need to ensure that the payees of dishonoured cheques are able to realise the payments. Government is therefore considering the option of amending the Negotiable Instruments Act suitably.”
The Mumbai bench of the Income Tax Appellate Tribunal recently ruled that no tax can be levied on capital gain arisen on sale of Idea Cellular shares by a Mauritius subsidiary of the Tata’s to Birla Group Company during the financial year 2006-07.
The Assessee -company, in the instant case, engaged in the promotion of new business ventures offering consultancy services, web based services etc, filed its return of income pertains to taxability of capital gains of Rs. 10, 09, 44, 44,33,898/- in the hands of the assessee on sale of shares of IDEA by its wholly owned subsidiary (WOS), namely Apex Investment (Mauritius)Holdings Pvt. Ltd.(Apex).
However, the capital gains arising on sale of Idea Cellular shares held by Apex were not offered to tax in India since, according to the assesse, there would be no tax incidence in India as per the provisions of the India-Mauritius tax treaty.
The AO, however, held that capital gain arising out of sale of the shares of IDEA Cellular Ltd. By Apex, was taxable in the hands of the assessee amounted to 1L.crore.
Aggrieved by the order of the AO, the assessee preferred an appeal before the FAA and made elaborate submissions. The FAA referred to the provisions of section 93 and sub section -3 of the section and held that where there was a transfer of asset resulting into accrual of income the same would be taxable in India that the income in form of STCG had accrued to WOS of the assessee.
The AR relied upon the case of Azadi Bacho and contended that the entire capital gain invoking the section under Article 13 (4) of the India Mauritius treaty can claim an exemption and also added that Apex was a tax resident of Mauritius, capital gain earned by a tax resident of Mauritius was not chargeable to tax in India
The ITAT pointed out that provisions of section 93 will not apply in this case. For this section to apply there must be a transfer of assets by a tax resident of India (for example, an Indian company) to a non-resident.
The bench comprising of Shri Rajendra, Accountant Member and Ram Lal Negi, Judicial Member observed that section 93 can be considered as a charging section. But, there is no doubt that it is a deeming provision.
Finally the tribunal held that FAA was not justified in confirming the order of the AO with regard to applicability of the provisions of section 93 of the Act and dismissed the action of the lower I-T authorities to tax capital gains of around Rs 1 lakh crore in the hands of Tata Industries.
Subscribe Taxscan Premium to view the JudgmentHyderabad bench of Income Tax Appellate Tribunal (ITAT) has held that an assessee is entitled to claim exemption under section 54F of the Income Tax Act even if he holds more than one residential property.
Assessee in the recent case was an individual deriving income from pension, property, capital gains and other sources. Assessee has entered into a contract with a builder for development of the site into 15 apartments in 5 floors. During the course of assessment proceedings the Assessing Officer (AO) has noticed that the Long term capital gains arising out of the transfer of undivided share of land in respect of flats allotted to builder’s share and undivided share of land and short term capital gains arising out of sale of flat allotted to land owner’s share are chargeable to tax.
He also rejected the exemption claimed by the assesse under section 54F of the Act finding that as per the provision, if the assessee owns more than one residential house other than the new asset as on the date of transfer of the original asset he is not entitled to any exemption u/s. 54F of the Act.
The bench comprising of Accountant Member B.Ramakotaiah noted that the AO’s contention that assessee owns more than two residences was not correct since there is no dispute that the assesse held more than one building as on the date of transfer i.e., on 19-06-2001. “Subsequent acquisition of any number of houses will not prevent assessee claiming the deduction for transfer as on 19-06-2001. Therefore, the AO’s view can not be upheld. Assessee is entitled for deduction u/s. 54/54F.”
The bench, while accepting the contentions of the assessee, observed that section 54 read provides exemption to capital gains arising from transfer of a residential house property (being building or land appurtenant thereto), the income of which is chargeable under the head Income from house property. In this case the assessee fulfilled the conditions of the said section, hence he is entitled to claim exemption under section 54/54F of the Act.
Subscribe Taxscan Premium to view the JudgmentWhile amending the Central Excise (Appeals) Amendment Rules, the Central Government prescribed that revision application in form E.A.-8 can be submitted before the jurisdictional Principal Commissioner (Revisionary Authority).
Earlier, Form E.A.-8 shall be presented in person to the Under Secretary, Revision Application Unit, Government of India, Ministry of Finance, Department of Revenue, 4th Floor, Jeevan Deep Building, Sansad Marg, New Delhi-110 001, or sent by registered post to such officer.
Subscribe Taxscan Premium to view the JudgmentWhile quashing an ITAT order, the Kerala High Court ruled that income received from licensing a Property is taxable as Business Income under the provisions of the Income Tax Act, 1961.
The assesse, given its hotel along with its furnishings and equipment’s on license M/s Abad Motels and Resorts Private Limited for a period of seven years. While filing income tax return for the year under consideration, the assesse disclosed the license fee received from the above license under the head “income from business”. However, the assessing Officer brought the same under the head income from house property.
Though the first appellate authority granted relief to the assesse, the Tribunal restored the order of assessment.
Allowing the appeal filed against the Tribunal order, the High Court relied upon the judgment of Apex Court in Sultan Brothers Pvt. Ltd. v. CIT wherein a similar issue was answered in favour of the assesse.
The division bench comprising Justice Antony Dominic and Justice Dama Sheshadri Naidu clearly said that the intention of the parties as reflected in the agreement was to grant license in respect of a running hotel, the income of which can only be income from business.
Finally the court observed that the Commissioner of Income Tax was fully justified in setting aside the order of assessment and holding that the income of the assessee was income from business and not income from house property and found the order of Tribunal unsustainable.
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A two-judge bench of the Supreme Court today struck down the provisions of Section 45(1) of the Prevention of Money Laundering Act, 2002, insofar as it imposes two further conditions for release on bail, to be unconstitutional as it violates Articles 14 and 21 of the Constitution of India.
As per section 45(1) of the Prevention of Money Laundering Act, bail can be granted upon fulfillment of two conditions, namely., the Public Prosecutor must be given an opportunity to oppose any application for release on bail and the Court must be satisfied, where the Public Prosecutor opposes the application, that there are reasonable grounds for believing that the accused is not guilty of such offence, and that he is not likely to commit any offence while on bail.
The petitioners urged that the provision violates Article 14 of the Constitution since it is discriminatory and “manifestly arbitrary”.
The bench comprising Justice R.F Nariman and Justice Sanjay Kishan Kaul noted that under this provision, a person who may have nothing to do with the offence of money laundering may yet be denied bail, because of the twin conditions that have to be satisfied under Section 45(1) of the 2002 Act.
Analyzing provisions in detail, the bench observed “that manifestly arbitrary, discriminatory and unjust results would arise on the application or non-application of Section 45, and would directly violate Articles 14 and 21, inasmuch as the procedure for bail would become harsh, burdensome, wrongful and discriminatory depending upon whether a person is being tried for an offence which also happens to be an offence under Part A of the Schedule, or an offence under Part A of the Schedule together with an offence under the 2002 Act. Obviously, the grant of bail would depend upon a circumstance which has nothing to do with the offence of money laundering. On this ground alone, Section 45 would have to be struck down as being manifestly arbitrary and providing a procedure which is not fair or just and would, thus, violate both Articles 14 and 21 of the Constitution.”
The bench further pointed out if a person is charged with extortion under Sections 386 or 388, (such sections being included in Part A of the Schedule) and Section 4 of the 2002 Act, the person prosecuted under these sections would only be able to obtain bail after meeting the stringent conditions specified in Section 45. According to the bench, this would also make the provision arbitrary.
After declaring the provision as unconstitutional, the bench added that “All the matters before us in which bail has been denied, because of the presence of the twin conditions contained in Section 45, will now go back to the respective Courts which denied bail. All such orders are set aside, and the cases remanded to the respective Courts to be heard on merits, without application of the twin conditions contained in Section 45 of the 2002 Act. Considering that persons are languishing in jail and that personal liberty is involved, all these matters are to be taken up at the earliest by the respective Courts for fresh decision.”
Subscribe Taxscan Premium to view the JudgmentThe Bangalore ITAT, on Tuesday ruled that the assessment proceedings under the Income Tax Act cannot be nullified merely on ground of mentioning a wrong section in the order.
In the present case, the assessee approached the Tribunal on second appeal contending that a notice under section 153A of the Income Tax Act for the year 2012-13 was served on him in pursuant to a search. He argued that the notice is not valid as this assessment year is the current year in which the search itself was carried out. Therefore, he prayed before the Tribunal to quash the assessment order under section 153C.
The department, on the other hand, contended that there is no dispute that the search was conducted in the previous year relevant to the assessment year under consideration therefore the provisions of Section 153C are not applicable for the assessment year under consideration. It was said that the mention of this Section in the order is only a mistake which is covered under the provisions of Section 292BB of the Income Tax Act.
Dismissing the appeal, the bench noted that undisputedly when the search was carried out on 6.3.2012 then the provisions of Section 153C are not applicable for the assessment year under consideration i.e. 2012-13.
“Therefore, the assessment framed in question for the assessment year under consideration will be treated only under Section 143(3) and mere mention of section 153C in the assessment order will not render the assessment invalid or void ab-initio. It is apparent that this is a case of only a mistake of mentioning the assessment framed under Section 143(3) r.w.s 153C and no other material or procedural defect either pointed out or found on the record to suggest that the Assessing Officer has not followed the procedure for framing the assessment under Section 143(3).”
Subscribe Taxscan Premium to view the JudgmentWhile dismissing the appeal of revenue, the New Delhi bench of Income Tax Appellate Tribunal in its recent order allowed a claim of expenditure by a Company for travelling expenses incurred on behalf of its Associated Companies.
The division bench, while allowing the contentions of the assesse-Company, said that the claim is allowable under the Income Tax Act since the same was incurred for the purpose of its business.
During the assessment proceedings AO disallowed an amount of Rs.23, 42,772/- out of travelling expenses claimed by the assessee company to the tune of Rs.89, 15,775/- on the ground that two major travelling expenses of Rs.10, 05,936/- and Rs.13, 36,836/- made to Taj Air Limited on 12.04.2010 and 10.11.2010 on the copy of vouchers bearing description ‘private jet falcon for Ram/Ajit’ has been furnished without any supporting documents.
The assessee carried the matter by way of filing appeal before the ld. CIT (A) who has deleted the addition by allowing the appeal with keeping in view the fact that since the assessee company is providing services to the investing companies, interest in investment in various companies working in India and the assessee company has been arranging meetings of the investing companies that the prospective clientage of investing companies for which assessee company was charging 17% and 15% over and above the total expenditure incurred by it in respect of providing their services.
Aggrieved with the decision the revenue has challenged the impugned order of CIT (A) before the tribunal.
The tribunal restored the order of CIT (A) and observed that when the assessee company is operating under cost plus markup arrangement charging 15% and 17% over and above such expenses the amount has been incurred on behalf of the investor companies, the same are certainly business expenses.
Finally, the bench including Judicial Member Kuldip Singh and President G.D Aggarwal ordered that when the travelling expenses have been incurred by the assessee company on behalf of the associated company with 17% and 15% markup over and above the total expenditure, for which vouchers as well as email communications have been produced, the ld. CIT(A) has rightly and validly deleted the addition of Rs.23,42,772/-.
Subscribe Taxscan Premium to view the JudgmentThe President of India has given his assent today to the Ordinance to amend the Insolvency and Bankruptcy Code, 2016 (the Code).
The Ordinance aims at putting in place safeguards to prevent unscrupulous, undesirable persons from misusing or vitiating the provisions of the Code. The amendments aim to keep out such persons who have wilfully defaulted, are associated with non-performing assets, or are habitually non-compliant and, therefore, are likely to be a risk to successful resolution of insolvency of a company.
In addition to putting in place restrictions for such persons to participate in the resolution or liquidation process, the amendment also provides such check by specifying that the Committee of Creditors ensure the viability and feasibility of the resolution plan before approving it. The Insolvency and Bankruptcy Board of India (IBBI) has also been given additional powers
It may be recalled that the regulations by the IBBI were also amended recently to ensure that information on the antecedent of the applicant submitting the resolution plan along with information on the preferential, undervalued or fraudulent transactions are placed before the Committee of Creditors in order for it to take an informed decision on the matter.
Along with other steps towards improving compliances, actions against defaulting companies to prevent misuse of corporate structures for diversion of funds, reforms in the banking sector, weeding out of unscrupulous elements from the resolution process is part of ongoing reforms of the Government. These would help strengthen the formal economy and encourage honest businesses and budding entrepreneurs to work in a trustworthy, predictable regulatory environment.
The Ordinance amends sections 2, 5, 25, 30, 35 and 240 of the Code, and inserts new sections 29A and 235A in the Code.
Subscribe Taxscan Premium to view the JudgmentGist of the amendments is given below:
(i) Clause (e) of section 2 of the Code has been substituted with three clauses. This would facilitate the commencement of Part III of the Code relating to individuals and partnership firms in phases.
(ii) Clause (25) and (26) of section 5 of the Code which define “resolution applicant” and “resolution applicant” are amended to provide clarity.
(iii) Section 25(2)(h) of the Code is amended to enable the resolution professional, with the approval of the committee of creditors (CoC), to specify eligibility conditions while inviting resolution plans from prospective resolution applicants keeping in view the scale and complexity of operations of business of the corporate debtor to avoid frivolous applicants.
(iv) Section 29A is a new section that makes certain persons ineligible to be a resolution applicant. Those being made ineligible inter alia include
- willful defaulters,
- those who have their accounts classified as non-performing assets for one year or more and are unable to settle their overdue amounts include interest thereon and charges relating to the account before submission of the resolution plan,
- those who have executed an enforceable guarantee in favour of a creditor, in respect of a corporate debtor undergoing a corporate insolvency resolution process or liquidation process under the Code
- and connected persons to the above, such as those who are promoters or in management of control of the resolution applicant, or will be promoters or in management of control of corporate debtor during the implementation of the resolution plan, the holding company, subsidiary company, associate company or related party of the above referred persons.
(v) It has also been specifically provided that CoC shall reject a resolution plan, which is submitted before the commencement of the Ordinance but is yet to be approved, and where the resolution applicant is not eligible as per the new section 29A. In such cases, on account of the rejection, where there is no other plan available with the CoC, it may invite fresh resolution plans.
(vi) Section 30(4) is amended to explicitly obligate the CoC to consider feasibility and viability of the resolution plan in addition to such conditions as may be specified by IBBI, before according its approval.
(vii) The sale of property to a person who is ineligible to be a resolution applicant under section 29A has been barred through the amendment in section 35(1)(f).
(viii) In order to ensure that the provisions of the Code and the rules and regulations prescribed thereunder are enforced effectively, the new section 235A provides for punishment for contravention of the provisions where no specific penalty or punishment is provided. The punishment is fine which shall not be less than one lakh rupees but which may extend to two crore rupees.
(ix) Consequential amendments in section 240 of the Code, which provides for power to make regulations by IBBI, have been made for regulating making powers under section 25(2)(h) and 30(4).
The Madras High Court recently held that routers, hubs and switches would come within the meaning of ‘computer peripherals’ for which lower rate of 4% VAT is applicable under the Tamil Nadu General Sales Tax Act, 1959.
Justice T.S.Sivagnanam was hearing two writ petitions filed by the same petitioner challenging the clarification issued by the first respondent/Commissioner of Commercial Taxes, dated 29.07.2004, in exercise of his power under Section 28-A of the Tamil Nadu General Sales Tax Act, 1959.
The petitioner is a dealer in parts and accessories of computer and computer peripherals, and registered on the file of the second respondent, under the provisions of TNGST and Central Sales Tax Act, 1956.
The petitioner had approached the first respondent The Commissioner of Commercial Taxes seeking for a clarification with regard to the rate of tax, payable on certain devices. In return the respondent provided different tax rates for each computer devices.
The subject matter of the present writ petition were three products/items viz., i) Switches, ii) Hubs and iii) Routers were classified as computer peripherals and their tax rates. There was no problem insofar as the petitioner is concerned till 2002-03, and this problem arose on account of a clarification issued by the first respondent in favour of WIPRO Ltd., dated 23.12.2002.
In the said clarification the Commissioner clarified that the Switches and Electronic Cables are taxable at 10% and Hubs & Routers are concerned, they are treated as peripherals used for data communication and taxed at 12%.
When the petitioners assessment were reopened based on the clarification needed by other dealer requested the commissioner for confirming the clarification issued in their favour on 24.08.1998 with regard to products like Switches, Hubs of Routers, by clarifying that they are computer peripherals and taxable at 4% under Entry 18 (i) of Part B of the first schedule to the TNGST Act.
The single Judge held that in respect of the assessee’s own case, under Karnataka Value Added Tax Act, 2003, Advance Ruling Authority under the KVAT Act has ruled in favour of the petitioner and held that the products dealt with by them are computer peripherals.
The court also added that the impugned clarification is not sustainable, and the clarification issued in favour of the petitioner, dated 24.08.1998 after obtaining the Expert’s opinion of ELCOT will be valid and sustainable for all purpose.
The bench relied upon the decision of tribunal in the case of C.M.C Ltd., would support the petitioner’s case, insofar as the product, routers is concerned.
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