The Income Tax Appellate Tribunal (ITAT), Delhi Bench held that no Income Tax payable on a fee for Technical Services not rendered in India.
The case of the assessee, McCANN Erickson (India) Pvt. Ltd. was reopened for assessment and the assessment was framed u/s 147 of the Income Tax Act, 1961 While framing the assessment, the Assessing Officer did not accept the explanation offered by the assessee regarding non-applicability of provision for deduction of tax, therefore, he proceeded to make the addition of Rs.57,38,948/- on account of non-deduction of tax in respect of Global Account Coordination cost.
The assessee preferred appeal before CIT(A) who after considering the submissions and perused material available on record, dismissed the appeal of the assessee.
The assessee reiterated the submissions made in the appellate proceedings. He contended the appeal as against the order of the Assessing Officer who made disallowance by invoking the provision of 40(a)(i) of the Act on account of the treatment of Global Account Coordination Cost of Rs.57,38,948/- as per provisions of section 195 read with explanation 2 of section 9(1)(vii)(b) of the Act. He contended that so far as the provision of section 9(1)(viii) and relevant Articles of DTAA is concerned, no tax should be deducted under section 195 of the Act hence, no disallowance can be made under section 40(a)(i) of the Act. He further submitted that CIT(A) failed to consider that retrospective amendment in law cannot charge the tax withholding liability with retrospective effect unless such services were rendered in India.
The Coram of Accountant Member, Dr. B.R.R.Kumar and Judicial Member Kul Bharat relied on the case of Ashapura Minichem Ltd. vs ADIT wherein it was held that the prevailing legal position was that unless the technical services were rendered in India, the fees for such services could not be brought to tax under section 9(1)(vii). The law amended was undoubtedly retrospective in nature but so far as tax withholding liability is concerned, it depends on the law as it existed at the point of time when payments, from which taxes ought to have been withheld, were made. The tax deductor cannot be expected to have the clairvoyance of knowing how the law will change in the future. A retrospective amendment in law does change the tax liability in respect of an income, with retrospective effect, but it cannot change the tax withholding liability, with retrospective effect. The tax withholding obligations from payments to non-residents, as set out in Section 195, require that the person making the payment “at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force”. When these obligations are to be discharged at the point of time when payment is made or credited, whichever is earlier, such obligations can only be discharged in the light of the law as it stands at that point of time.
The ITAT held that the Assessing Officer was not justified in fastening the liability of tax deduction by relying on the amendment which was inserted in the year 2010 with retrospective effect from 01.04.1976. The Assessment Year in question is 2008-09, therefore, provision of section 40(a)(i) of the Act ought not to have been invoked in the case of the assessee. Therefore, directed the Assessing Officer to delete the addition.
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The Institute of Chartered Accountants of India (ICAI) has signed a Memorandum of Understanding (MoU) with Qatar Financial Centre (QFC), Qatar for the export of accounting services to Qatar and & exploring professional and business opportunities for ICAI members through collaborative initiatives.
The MoU was signed by CA Nihar N Jambusaria, President, ICAI and Mr Yousuf Mohamed Al-Jaida, Chief Executive Officer, QFC. The agreement will pave the way for closer collaboration between QFC and ICAI on mutually beneficial initiatives, including increasing opportunities for ICAI members in the areas of assurance and auditing, advisory, taxation, financial services, and other allied areas. Through this partnership, both organisations will extend support to Indian businesses looking to set up in Qatar and explore the available opportunities through joint roundtables, networking events, and other exchange programmes.
CA Nihar N Jambusaria, President, ICAI said: “This is a stride forward to work closely with each other drawing synergies from the professional expertise available at either end especially in areas of auditing, assurance, financial services, taxation, and alike. The signing of this MoU between ICAI and QFC has opened many windows of opportunities for Indian Chartered Accountants in that part of the world and would, in turn, be an impetus for the growth of economies at both ends.” He also mentioned that ICAI Doha Chapter, the oldest Chapter established in 1981, is instrumental in finalizing the MoU and is registered under QFC. He further added that the Chapter is affiliated with the Indian Business & Professional Council under the aegis of the Indian Embassy in Qatar.
Mr Yousuf Mohamed Al-Jaida, Chief Executive Officer, QFC, said: “The signing of the agreement with one of the largest accountancy bodies of the World marks yet another important step in our efforts to strengthen human capital and promote entrepreneurship in Qatar. Through this partnership, both QFC and ICAI will work toward enabling entrepreneurs, investors, and innovators from India to use our platform and set up their ventures in Qatar to become part of Qatar’s robust market. Supported by Qatar’s dynamic business ecosystem and our strategic location, this agreement will further enhance the state of Qatar’s financial services sectors in years to come.”
The event was also graced by Dr Deepak Mittal, His Excellency Ambassador of India to the State of Qatar as Guest of Honour. In his address, he mentioned that “India and Qatar share cordial relations and the important contribution that the Indian community is making in Qatar has strengthened the deep-rooted friendship of the two countries. It is a very welcome step that the two Institutes have come together for the benefit of the accountancy fraternity at either end.” He also ensured his full support and cooperation in various endeavours of ICAI in Qatar.
Through this partnership, QFC and ICAI will work together to nurture and develop local Qatari professionals, entrepreneurs and students through specialised training; explore the possibilities of study exchange programmes for QFC and ICAI employees; collaborate on opportunities that may arise in the fields of corporate governance, technical research and advice, quality assurance, forensic accounting, and Islamic Finance; and share information concerning the accounting profession in India, Qatar and internationally.
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The Institute of Chartered Accountants of India (ICAI) released the Frequently Asked Questions (FAQs) on Circular regarding Relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013 issued by the Ministry of Corporate Affairs on May 3, 2021.
The ICAI has clarified that relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013 is a scheme introduced by the Ministry of Corporate Affairs for the purpose of condoning the delay in filing certain forms related to creation/ modification of charges particularly due to the difficulties being faced by COVID-19 pandemic.
The objective of the said circular is to provide relaxation of time to Companies or Charge holders for condoning the delay in filing certain forms related to the creation/ modification of charges under section 77 of the Companies Act, 2013 (Act).
It is noteworthy that this scheme is not permanent. It is a one-time waiver that has been allowed to Companies to file their forms related to the creation or modification of charges.
The ICAI while addressing the question that for which Forms, the aforesaid Circular is applicable said that The Circular shall be applicable in respect of filing of Form No. CHG-1 and Form No. CHG-9 by a company or a charge holder, as per the date of creation/modification of charge. However, this is not applicable on CHG-4 i.e. Particulars for the satisfaction of charge thereof, and CHG-6 i.e. Notice of appointment or cessation of receiver or Manager.
The relaxation is applicable in respect of filing of Form No. CHG-1 and Form No. CHG-9 by a company or a charge holder, where the date of creation or modification of charge is before 01.04.2021, but the timeline for filing such form has not expired u/s 77 of the Act as on 01.04.2021 or falls on any date between 01.04.2021 to 31.07.2021 (both dates inclusive).
In the case where the date of creation/modification of charge is before 01.04.2021 but the time limit of 120 days has not expired, then the period beginning from 01.04.2021 and ending on 31.07.2021 shall not be taken into consideration for the purpose of counting the number of days under section 77 or section 78 of the Act. Further, in case, the form is not filed within such period, the first day after 31.03.2021 shall be reckoned as 01.08.2021 for the purpose of counting the number of days within which the form is required to be filed under section 77 or section 78 of the Act.
In case, where the date of creation/modification of charge is between 01.04.2021 to 31.07.2021 (both dates inclusive), then the period beginning from the date of creation/ modification of charge to 31.07.2021 shall not be taken into consideration for the purpose of counting of days under section 77 or section 78 of the Act.
Further, in case the form is not filed within such a period, the first day after the date of creation/modification of charge shall be reckoned as 01.08.2021 for the purpose of counting the number of days within which the form is required to be filed under section 77 or section 78 of the Act.
The Scheme is not applicable under various circumstances namely the forms i.e.CHG-1 and CHG-9 had already been filed before the date of issue of this Circular; the timeline for filing the form has already expired under section 77 or section 78 of the Act prior to 01.04.2021; the timeline for filing the form expires at a future date, despite the exclusion of the time provided above; Filing of Form CHG-4 for the satisfaction of charges; and Filing of Form CHG-6 for Notice of appointment or cessation of receiver or Manager.
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The Institute of Chartered Accountants of India(ICAI) directed the candidates to bring to notice their observations on question papers relating to CA Examinations being held in July 2021.
The candidates can bring to the notice of the Examination Department, their observations, if any, on the question papers relating to CA Examinations being held in July 2021 by e-mail at examfeedback@icai.in or by way of a letter, sent by Speed Post, at the “the Additional Secretary (Exams), the Institute of Chartered Accountants of India ICAI Bhawan, Indraprastha Marg New Delhi 110 002”.
The observations can be brought to the notice of the Examination Department latest by 25th July 2021 for the Final & Intermediate Course and for Foundation Course by 5th August 2021.
It is noteworthy that only those observations of students will be taken up for consideration who provide their following details i.e.; Name of the Student, Registration Number, Roll Number, email-id, and Mobile Number.
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In a major relief to Ray-Ban India, the Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi bench has directed the central excise department to allow refund of excise duty paid by the company under protest in the year 2018.
The appellant-Company is engaged in manufacturing sunglasses and spectacle frames around the globe. In the year 2004, the Central Excise department has alleged that the appellant violated Rules 3,4 and 7 of the Cenvat Credit Rules and accordingly, demanded Rs. 16,89,669 along with interest and equal penalty. However, the final order passed in relation to the same was finally deleted by the Tribunal in the year 2017due to the monetary limit being less than Rs.15 lakh. Thereafter, a refund claim was filed by the appellant on 19.02.2018 about the sum of Rs.16,89,669/- as was deposited by the appellant under protest during the period of proceedings.
While considering the appeal, Judicial Member Rachna Gupta held that since the appellant has challenged the amount which got deposited by him during the investigation, the protest is very much lodged on his part not as a party to such decision, the plea of limitation should not debar his claim.
“However, coming to mote controversy herein, since one year of limitation of refund, from the relevant date, definition thereof becomes important,” the Tribunal said.
Citing the provisions of section 11B of the Central Excise Act, the Tribunal allowed the plea of the appellant and held that “the aforesaid provision makes it abundantly clear that it is the date of judgement as consequence whereof the amount became refundable. No doubt, the CESTAT’s Final order is of 31.3.2012, vide which the amount/duty paid by the appellant was made refundable but the Department opted for continuation of the said litigation by filing an appeal before the High Court. Once that option got exercised, the final judgement about the entitlement of the appellant to have the refund of said amount/duty paid, is the judgement announced by High Court in the said appeal. Since the said appeal of the Department was dismissed by Hon’ble High Court on 21.04.2017 irrespective of technical ground, the fact remains that entitlement of the appellant to refund of duty paid got finalised only on 21.04.2017 hence the relevant date under section 11B(ec) is none but 21.04.2017. The refund claim is filed on 19.02.2018 which, therefore, is very much within one year thereof, hence, wrongly been held to be barred by time.”
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In a major relief to Tech Mahindra, the Income Tax Appellate Tribunal (ITAT), Mumbai Bench directed the Assessing Officer to allow deduction on foreign exchange gain.
The assessee, Tech Mahindra Business Services Ltd. has included interest earned on bank guarantee and fixed deposit amounting to Rs.1,44,03,437/- in the profits of the business and has claimed deduction under section 10A of the Act thereon. The AO being of the view that interest income being assessable under the head ‘Income from other sources; hence, cannot be treated as business income and further, observing that it has no connection with the business income, the assessing officer disallowed the deduction claimed under section 10A of the Act on the interest income.
Further, he noticed that the assessee has included an amount of Rs.4,86,061/- towards foreign exchange gain for the purpose of computing deduction under section 10A of the Act. Being of the view that gain derived from fluctuation in the rate of foreign exchange deposit in EEFC account arises after completion of the export activity and does not have any direct nexus with the export transaction, disallowed assessee’s claim of deduction under section 10A of the Act. Though, the assessee contested the aforesaid decision of the assessing officer before DRP, however, the assessee was unsuccessful.
J. D. Mistri, senior counsel appearing for the assessee submitted, the assessee has earned the interest income from the deposit made towards bank guarantee and temporarily parking of surplus funds in fixed deposit. He submitted, since the assessee has earned such interest income in course of business, it is eligible for deduction under section 10A of the Act.
As regards deduction claimed in respect of foreign exchange gain, the learned counsel submitted, since the assessee derives income only from its 10A unit which is engaged in export activity, it has outstanding overseas creditors as on the last day of the financial year. He submitted the assessee operates an EEFC account with a bank in India wherein the assessee is permitted to maintain balance and undertake transactions in foreign currency. He submitted such an account to facilitate receipt of export proceeds and payments of import payable in foreign currency, without there being any need to convert the same into Indian currency. He submitted, as per accounting standard-11, it is mandatory for a company to re-instate its foreign currency mandatory items such as debtors, creditors, cash and bank balances, etc., to the rate of exchange prevailing as of 31st March of each year.
The coram headed by Vice President Pramod Kumar and Saktijit Dey observed that the deposits on which the assessee had earned interest income were on account of its business activity. There cannot be any doubt that deposits made towards bank guarantees are purely in connection with its business activity. As far as the interest on fixed deposit is concerned, it is an accepted factual position that the surplus fund available with the assessee and not immediately required for business was temporarily invested in fixed deposit. Thus, this activity of parking surplus funds in the fixed deposit has to be construed to be in the course of its regular business activity.
The ITAT held that the assessee is eligible to claim deduction under section 10A of the Act in respect of the interest income.
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The Reserve Bank of India (RBI) on Friday issued the review of instructions on Interest on overdue domestic deposits.
The RBI has directed all Scheduled Commercial Banks (including RRBs), All Small Finance Banks, All Local Area Banks, and All Primary (Urban) Co-operative Banks/ District Central Co-operative Banks/ State Co-operative Banks to refer to Section 9 (b) of Master Direction – Reserve Bank of India (Interest Rate on Deposits) Directions, 2016 dated March 3, 2016, and the Master Direction -Reserve Bank of India (Co-operative Banks- Interest Rate on Deposits) Directions, 2016 dated May 12, 2016, in terms of which if a Term Deposit matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract a rate of interest as applicable to savings deposits.
“On a review of these instructions, it has been decided that if a Term Deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower,” the RBI said.
The existing section 9 (b) in respect of interest on overdue domestic deposits says that if a Term Deposit matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings deposits.
However, the amended section reads as, “If a Term Deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower.”
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The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Bangalore Bench allowed the refund of cenvat credit as the transition of refund amount merely inadvertent error, the same was made good by reversing credit into GSTR-3B.
The appellant, Convance Clinical Development Pvt. Ltd. is engaged in providing support services to its group companies located outside India and they are providing the services in the nature of Business Support Services and Business Auxiliary Services. During the course of its operation, the appellant received certain input services which were entirely used for providing taxable service exported in terms of Rule 6A of Service Tax Rules, 1994. Since the services provided by the appellant were exported outside India and there was no service tax liability on the output services provided, the cenvat credit availed by the appellant remained unutilized.
Appellant being an exporter was entitled to claim unutilized cenvat credit availed during the relevant period and appellant filed a claim for refund of cenvat credit availed during the period April 2016 to June 2016 under Rule 5 of Cenvat Credit Rules read with Notification No.27/2012-CE dt. 18.06.2012. Thereafter a show-cause notice was issued to the appellant proposing to reject the refund claim for the reason that the appellant had transitioned the credit for the said period into the GST regime and consequently the appellant has not complied with the conditions of the notification. After following the due process, the original authority rejected the refund claim. Aggrieved by the said order, the appellant filed an appeal before the Commissioner (Appeals).
Commissioner(Appeals) taking the ground that the Order-in-Original has traversed beyond the show-cause notice inasmuch as the ground for rejection did not form part of the show-cause notice and other grounds were also taken, but the Commissioner(Appeals) dismissed the appeal on the ground that the appellant has not adhered to the condition laid down in the Notification.
CA Sachin Agarwal, the counsel for the appellant contended that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law and the documentary evidence submitted by the appellant in support of their claim. He further submitted that the respondent has rejected the refund application on the limited ground that the appellant has not debited the refund claim amount from the cenvat credit and the service tax return at the time of making the refund and such amount has been transferred through TRAN-1 into the GST regime.
The coram of Judicial Member, S.S.Garg found that appellant by sheer inadvertent mistake has transitioned the cenvat credit into TRAN-1 during the GST regime. As soon as, he realized his bonafide and unintentional mistake and the reversal was done in GSTR-3B returns in May 2018 itself.
The CESTAT further said that during the relevant period, the appellant has not utilized the cenvat credit and it was merely a procedural lapse which was rectified by the appellant on its own and was also informed by the Department regarding the subsequent reversal in GSTR-3B filed by the appellant in May 2018.
“In my view, since the appellant who is a 100% exporter of service and has reversed the credit wrongly taken through GSTR-3B is sufficient to hold that the amount of cenvat credit claimed as refund has not been utilized by the appellant in any manner and has been deemed to have been reversed by the appellant. Learned Commissioner(Appeals) should have taken a liberal view of a bona fide mistake committed by the appellant without any intention to claim an unjustified refund. I also find that the impugned order has also traveled beyond the show-cause notice because all the submissions made by the appellant during the adjudication proceedings were not considered by both the authorities below,” the CESTAT said while granting the consequential relief.
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The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Delhi Bench ruled that the finished goods are not liable for confiscation in absence of any finding of attempted clandestine removal of excisable goods.
The appellant, M/s Maa Santoshi Tobacco Co. was indulging in evasion of Central Excise duty by resorting to clandestine manufacture and clearance of their finished goods, a search operation was conducted, wherein searches were conducted by the officers of DGCEI at the factory of the appellant and related premises.
The appellant was under the physical supervision of the Officers of the Central Excise Department. During the period of inspection Shri S. K. Lavasia, Superintendent, and Shri Nathu Lal Jain, Inspector was posted at the factory of the appellant. As per Rule 6 of the Central Excise Rules, in the case of cigarette, the Superintendent or Inspector of Central Excise is required to assess the duty payable before removal by the assessee. Further, Rule 11 stipulates that no excisable goods shall be removed from the factory or a warehouse except under an invoice signed by the owner of the factory or his authorized agent, and in case of cigarette, each such invoice shall be countersigned by the Inspector or Superintendent of Central Excise before the cigarettes are removed from the factory.
There is no allegation on the appellant of having removed any finished goods clandestinely without informing the Superintendent / Inspector. The arrangement of posting of Central Excise Officers round the clock was modified by the CBIC vide Circular dated May 1, 2017. The Board taking notice of a limited number of officers posted in the Range and the problem being faced in posting the Officers round the clock, and also by the cigarette manufacturing units, observed that in view of Rule 6 and 11 read together, the presence of Central Excise Officer is required for discharging the twin function of assessment of duty payable and countersigning the invoices before the cigarettes are removed from the factory.
The coram of Judicial Member Anil Choudhary ruled that any finished goods found not entered in the RG-I register on the date of inspection are not liable for confiscation in absence of any finding of attempted clandestine removal of the excisable goods. Further, the raw material which was found lying in the factory of the appellant was admittedly not manufactured by the appellant, and as such the same is not dutiable in the hands of the appellant. Thus, there is no requirement for confiscation of raw material in the facts and circumstances.
The CESTAT said that the order of confiscation and penalty can be made only in case of fraud, collusion, willful misstatement, suppression of facts, or any contravention of the provisions of the law with intent to evade duty. There is no such allegation in the facts of the present case save and except nonfinding or nonproduction of the statutory register RG-I and Form-IV for the reasons that the same were missing and could not be located.
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The Amand Shah, Technical Member has taken over the charge of Acting Chairman, National Anti Profiteering Authority (NAA). He has been assigned an Additional charge till the appointment of the New Chairman.
Mr. Shah is an officer of the 1991 batch of the Indian Revenue Service. The officer has held diverse responsibilities within the gamut of Customs, Central Excise, Service Tax, and GST also a Course Director for the training of Indian Revenue Service officers. The officer rendered distinguished service as a Director in the Ministry of Agriculture. He has joined the Authority after completing his tenure as Commissioner, Central Taxes and Customs, Gautam Buddh Nagar.
He has taken over the charge of Chairman, National Anti-Profiteering Authority with effect from 2 June, 2021.
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The Institute of Chartered Accountants of India (ICAI) released the Audit Quality Maturity Model.
The ICAI President, CA. Nihar N. Jambusaria, while pointing out the importance of quality audit, said that the quality audit is an important part of an organization’s quality management system and is a key element in the Audit Firm’s overall quality system standards. With the advancement of new technologies, President, ICAI it is all the way more important for Auditors to get their hands on new-age technologies like Data Analytics and Robotic Process Automation and make constant improvements in the Audit Quality matrix.
The Audit Quality Maturity Model -Version 1.0 (AQMM v1.0) is a capacity-building mea- sure initiated by ICAI and the objective of this Evaluation Matrix is for sole proprietors and Audit firms to be able to self-evaluate their current level of Audit Maturity, identify areas where competencies are good or lacking and then develop a road map for up- grading to a higher level of maturity.
“I am pleased to note that it is a cross-functional model and covers operations, HR and functional setup of the firm. It also covers engagement teams, firm leadership, IT helpdesk, audit tools, human resources team, administration department, legal cell, networking, and the management information systems desk of the firm. I compliment CA. Durgesh Kumar Kabra, Convenor, CA. Shriniwas Y. Joshi, Deputy Convenor, and other members of the Centre for Audit Quality for bringing out this Model to assist the members in evaluating and then enhancing their audit quality delivery. I am confident that the members and other stakeholders would find this AQMM highly useful in their professional journey,” the ICAI President said.
The Audit Quality Maturity Model -Version 1.0 (AQMM v1.0) is a capacity building measure initiated by ICAI and the objective of this Evaluation Matrix is for sole proprietors and Audit firms to be able to self-evaluate their current level of Audit Maturity, identify areas where competencies are good or lacking and then develop a road map for upgrading to a higher level of maturity.
In the Council meeting held on January 9, 2021, it was decided that both the Peer Review Board and the Centre for Audit Quality (CAQ) would need to develop an ecosystem that is acceptable to both and such a collaborative approach would have the advantage of the CAQ developing the quality standards and Peer Review Board testing the said standards.
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Amazon has invited applications from CA Qualified PCC and completed two yrs of articleship for the post of Financial Analyst intern. Amazon is currently seeking an Intern in the Last-mile Finance Team for analysis and due diligence.
Duration of engagement: 12 months
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For more details Click here.
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The Andhra Pradesh High Court held that the refund of interest on pre-deposit to be determined from the expiry of 3 months from the date of communication of the order.
The appellant, M/s.Maithan Ceramics Limited had appealed before the Office of the Commissioner of Customs, Visakhapatnam challenging an Order-In- Original imposing duty and penalty upon him with regard to incorrect availing of DEPB scrips. During the pendency of the Appeal, the appellant had deposited the duty and penalty as per the Order In Original.
Upon the Appeal being allowed the appellant sought a refund of the duty and penalty along with interest before the Commissioner. The Commissioner allowed a refund of the deposit along with interest at the prescribed rate from the date of making the deposit to the date of refund. This order was appealed before the Commissioner of Appeals, who set aside the interest component ordered in favor of the appellant on the ground that the deposit of duty and penalty made by the appellant is not a pre-deposit in terms of Section 129E of the Customs Act. Appellant filed an appeal before the Tribunal, which reversed the order of the first appellate authority and held that the deposit made by the appellant was pre-deposit under Section 29E of the Customs Act, 1962, and interest as applicable on pre-deposit needs to be paid to the appellant.
However, the Tribunal modified the order on an application of the Department to the extent that the interest, as applicable during the period, on pre-deposit under section 129EE, needs to be paid to the appellant.
Mr. P.N.Sunil Kumar Reddy, counsel appearing for the appellant submits that the rectification order incorrectly applied Section 129EE of the Customs Act and denied the appellant interest from the date of deposit till the date of payment. It is contended that the deposit was made in 2006 when there was no statutory restriction on the discretion to grant interest from the date of deposit. Hence, the rectification order was incorrect and contrary to the law declared by the Apex Court in Sandvik Asia Limited v. Commissioner of Income Tax-I, Pune, and others.
The division bench of Justice Joymalya Bagchi and Justice K. Suresh Reddy ruled that the interest on the pre-deposit refunded to the appellant is to be determined as pre amended Section 129EE of the Customs Act i.e., for a period commencing after the expiry of three (3) months from the date of communication of the order of the appellate authority till the refund of such amount and not from the date of deposit of the said amount till the date of refund.
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In a relief to Red Hat India Private Limited, the Income Tax Appellate Tribunal (ITAT), Mumbai Bench ruled that adjustment relating to International Transactions pertaining to the provision of software support services is not sustainable and is liable to be deleted as DRP’s directions were not followed by the Assessing Officer.
The assessee, Red Hat India Private Limited assailed that order of the AO confirming the TPO’s action of rejecting Akshay Software Technologies Limited as a comparable company despite this comparable being reinstated by the DRP and thereby, violating the provisions of Section 144C(10)of the Act.
The assessee has further submitted that TPO and DRP confirming the TPO’s action erred on facts and in law in determining the arm’s length price for provision of software support services and thereby making an adjustment of INR 12,558,704 to the taxable income of the Appellant. In doing so, have grossly erred in modifying the economic analysis carried out by the Appellant in the Transfer Pricing documentation without providing any cogent reasons; rejecting various comparable companies selected by the Appellant in the Transfer Pricing Documentation and considering various comparable companies as compared to the Appellant without appreciating that such comparable companies are functionally dissimilar to the Appellant; and disallowing relevant adjustments as per the provisions of Rule 10B(1) and Rule 10B(3).
The assessee contended that the assessee has submitted that when the AO does not follow the direction of theDRP, the entire assessment order is liable to set aside. the assessee has requested the entire assessment order to be quashed as such.
The coram of Judicial Member Pawan Kumar Gadale and Accountant Member Shamim Yahya held that when a direction of the DRP is not followed on one of the issues the entire assessment order dealing with the several issues is liable to be quashed. It is settled law that there cannot be disproportionate retribution. In this view of the matter, the AO has not followed the direction of DRP, the adjustment on account for the provision of software support services is not sustainable and the same is liable to be deleted. Accordingly, we direct the adjustment in this regard to be deleted.
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The Income Tax Appellate Tribunal (ITAT), Bangalore Bench disallowance of depreciation on software purchase can not be made by invoking section 40(a)(i) of Income Tax Act, 1961.
The assessee, M/s. UKN Properties Pvt. Ltd. is engaged in the business of development of Real Estate. The AO noticed that the assessee has made payments for purchase of software without deducting tax at source. The AO noticed that the assessee has capitalized the value of software and accordingly claimed depreciation of Rs.3,72,465. Since the assessee has not deducted tax at source from the payment made for purchase of software, the AO took the view that the depreciation claimed on software is not allowable, as per provisions of section 40(a)(ia) of the Act. Accordingly, he disallowed the claim of depreciation u/s 40(a)(ia) of the Act.
The CIT(A) took the view that the payment made for purchase of software is in the nature of royalty as per the decision rendered by Hon’ble Karnataka High Court in the case of Samsung Electronics Company Ltd.. Accordingly, he directed the A.O. to treat the software purchases as revenue expenditure in the nature of payment of royalty. Since the assessee has not deducted tax at source from the payment made for purchase of software, the CIT(A) directed the AO to disallow entire purchase cost of software under section 40(a)(ia) of the Act.
The coram headed by the Vice President, N.V. Vasudevan and Accountant Member, B.R. Baskaran in the light of the coordinate bench decision rendered by Bangalore bench of Tribunal in the case of Kawasaki Microelectronics Inc. – India branch Vs. DDIT held that provisions of section 40(a)(i) cannot be invoked for making disallowance of depreciation on software purchase.
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The Chartered Accountants (CA) Students and the member’s Institute of Chartered Accountants of India (ICAI) prepared representation for extension of Old Course of CA Final and IPCC to be presented before ICAI.
“We, a group of CA students and members of ICAI, would like to submit this representation before the examination committee and the board of studies of the Institute Of Chartered Accountants of India (hereinafter referred to as “The Institute”) to extend the validity & examination attempts of the old course of CA Final & CA IPCC considering the drastic impact of the 2nd wave of Covid-19,” the letter read.
The members and students pointed out the prevailing 2nd wave of the COVID-19 virus has made a drastic impact on the lives of citizens of India and it has impacted each and everyone in some or the another way. With over 4 lakh lives lost until now, many of the CA students lost their family members during these past few months.
“This is not a legal representation and the students & members who are submitting this representation have no intent to use this representation as a base to file a legal suit against The Institute per se,” the letter said.
The letter reads, “As per the decision of the council 6 attempts are given to the students of CA Final Old Course in order to clear their examination but it is most important to note that there are many students that opted out directly to May 2021 cycle from the November 2020 cycle and not to January 2021 cycle, due consideration must be given to these students since this attempt of July 2021 will be the 5th Attempt for these students.”
Further, the members and Students said that a revised scheme to Opt-out was rolled out by The Institute on 1 July 2021 after receiving directions received from the Supreme Court, but the notification fails to consider many issues that the students have faced due to this pandemic.
Firstly, our country has a widespread culture of living in joint families, but the notification fails to include paternal/maternal uncle, paternal/maternal aunt, and cousins living in the same premises in the definition of “family members”. Due to this lapse, the benefit of this scheme has not been passed on to many students who live in joint families and were affected due to this pandemic.
Secondly, there are many of the students who belong to small cities & villages and shift from their hometown to metro cities to pursue this esteemed course and live in hostels & PG’s, but the notification fails to address the issue that if a student was affected due to the pandemic if a roommate or a hostel mate tested positive. It is due to this lapse, the benefit of this scheme has not been passed on to many students who live in hostels & PGs.
Thirdly, many of the students who belong to the Old course have settled down with their spouse and live on the premises with their in-laws now, but the notification has failed to include in-laws in the definition of “Family members”, it is due to this lapse many students who were genuinely affected by the pandemic have not received the benefit of this notification.
Fourthly, the students who belong to the old course have family members who are suffering from autoimmune disease and doctors have strictly told them that if they come in contact with this virus it would prove to be fatal for them. Also, it is most important to note that as per the statements made by the health ministry, the third wave of COVID-19 will affect small children and the effects are already visible in Maharashtra, there are female students from the old course that are mothering toddlers and they cannot risk the lives of their child, it is due to these reasons, neither they are able to appear for the upcoming exams to protect their family members nor they have an option to Opt-out and appear in the next cycle.
Fifthly, the institute is already passing on the benefit of extension to the students who are eligible to Opt-out and will be making administrative arrangements in November 2021 to conduct exams for the students of old course who are eligible to Opt-out as per the current scheme, then it would be very harsh not to provide an extension to those students who are unable to Opt-out on mere technical grounds whereas the issues do prevail in reality.
“The current examination attempt that was supposed to take place in May 2021 was delayed due to the second wave of COVID-19 pandemic and will now be conducted from 5th July 2021. It is pertinent to note that the students of the old course that are ineligible to opt-out, will have no option but to appear in an unprepared manner in this attempt due to the effects of the pandemic and if they fail, they will be shifted to a new course, Further, they will have to undergo mandatory training like MCS & ITT in order to be eligible to appear for the exams in November 2021 as a new syllabus student. Also, even if the results of this attempt are declared in the first week of September, it would become very difficult for the student to update himself with the new syllabus and simultaneously attend these training in a mere 45 to 50 days and a failure due to this difficulty will push his/her career by another 6 months,” the letter added.
The students prayed before the ICAI to take Suo-moto cognizance of our representation and address the issues by calling an emergency meeting of the council since the matter is of time-bound nature and the deadline expires in 2 days and passes appropriate directions so as to provide an extension of attempt for the students of the old course of Final as well as IPCC or alternatively provide an unconditional Opt-out option for the students of the old course.
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The Central Board of Direct Taxes ( CBDT ) on Friday notified the Form No. 5C regarding details of the amount attributed to capital assets remaining with the specified entity.
The Board has notified the Income-tax Amendment (18th Amendment), Rules, 2021 which seeks to amend the Income Tax Rules, 1962.
In the Income Tax Rules, 1962, in rule 8AA, the sub-rule (4) shall be inserted, which reads “in case of the amount which is chargeable to income-tax as income of specified entity under sub-section (4) of section 45 under the head ‘Capital gains.
The amount or a part of it shall be deemed to be from the transfer of short term capital asset if it is attributed to, a capital asset which is a short term capital asset at the time of taxation of amount under sub-section (4) of section 45; or capital asset forming part of a block of asset, or capital asset being a self-generated asset and self-generated goodwill as defined in clause (ii) of Explanation 1 to sub-section (4) of section 45.
The amount or a part of it shall be deemed to be from the transfer of long term capital asset or assets if it is attributed to the capital asset which is not covered by clause (i) and is a long term capital asset at the time of taxation of amount under sub-section (4) of section 45.
The notification inserted Rule 8AB in relation to the attribution of income taxable under sub-section (4) of section 45 to the capital assets remaining with the specified entity, under section 48.
Rule 8AB reads, “Where the aggregate of the value of money and the fair market value of the capital asset received by the specified person from the specified entity, in excess of the balance in his capital account, chargeable to tax under sub-section (4) of section 45, relates to revaluation of any capital asset or valuation of a self-generated asset or self-generated goodwill, of the specified entity, the amount attributable to the capital asset remaining with the specified entity for purpose of clause (iii) of section 48 shall be the amount which bears to the amount charged under subsection (4) of section 45 the same proportion as the increase in, or recognition of, the value of that asset because of revaluation or valuation bears to the aggregate of increase in, or recognition of, the value of all assets because of the revaluation or valuation.”
It further says that Where the aggregate of the value of money and the fair market value of the capital asset received by the specified person from the specified entity, in excess of the balance in his capital account, charged to tax under sub-section (4) of section 45 does not relate to revaluation of any capital asset or valuation of self- generated asset or self-generated goodwill, of the specified entity, the amount charged to tax under sub-section (4) of section 45 shall not be attributed to any capital asset for the purposes of clause (iii) of section 48.
The specified entity shall furnish the details of amount attributed to capital asset remaining with the specified entity in Form No. 5C.
Form No. 5C shall be furnished electronically either under digital signature or through electronic verification code and shall be verified by the person who is authorised to verify the return of income of the specified entity under section 140.
Form No. 5C shall be furnished on or before the due date referred to in the Explanation 2 below sub- section (1) of section 139 for the assessment year in which the amount is chargeable to tax under sub- section (4) of section 45.
The Principal Director General of Income-tax (Systems) or the Director-General of Income-tax (Systems), as the case may be, shall specify the procedure for filing of Form No. 5C; specify the procedure, format, data structure, standards, and manner of generation of electronic verification code, referred to in sub-rule (6), for verification of the person furnishing the said Form; and be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the Form No 5C so furnished.
In the principal rules, in Appendix II, after Form No. 5B, the Form No. 5C shall be inserted which pertains to the details of the amount attributed to capital assets remaining with the specified entity.
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The Orissa High Court refused to grant Bail to a person alleged of wrongful availment of Input Tax Credit (ITC) without actually supplying goods and services.
Mr.A. Pattanaik, the counsel for the Petitioner, Santosh Kumar Gupta submitted that the case against the Petitioner is founded upon the allegations that he had created about 10 Firms and was generating fake bills, invoices in the name of said Firms facilitating the availment of the benefit of Input Tax Credit (ITC) without actually supply/ receipt of goods and services which were credited in the name of those Firms in the Bank Accounts and that he in fact was actually handling all those accounts having taken signed blank cheques from said Account-Holders.
Mr. Pattanaik said that it is not the case in the complaint that in reality, such proprietors of those Firms were not there and the materials against the Petitioner are the statements of those persons who in order to get rid of the rigors of law have implicated this Petitioner. He submitted that materials on record do not indicate the indulgence of the Petitioner in the business affairs of all those Firms. According to him, the entire case of the prosecution is based on the documentary evidence, by now all such documents which according to the prosecution are incriminating have been seized and the statements of the material witnesses have been recorded.
He submitted that the quantum of ITC based upon all those fraudulent transactions as alleged stated to have been taken, has been highly inflated in order to place gravity to the case.
He further submitted that no such direct material has been collected to show that this Petitioner had passed on the ITC to the tune as above for having unlawful gain unto himself, when the fact remains that in the meantime, the Department have issued summons to all those entities for payment of ITC availed by them.
Mr. Ch. S. Mishra, Senior Standing Counsel for the CGST opposed the move. Referring to the written objection, he submitted that here the Petitioner is involved in the commission of Economic Offences and the materials collected so far reveal that the Petitioner is the kingpin and has defrauded the State Exchequer to the tune of a huge amount around Rs.40.66 crore by availing the ITC simply by managing to have transactions reflected on papers without a supply of goods or services in reality and for the purpose, he has created enormous fake documents such as invoices, bills, etc., besides creating fake Firms and opening Bank accounts in the name of those entities which have no real existence in the Commercial World.
The single judge bench of Justice D. Dash while refusing to grant bail held that the petitioner stands in the direction of making unlawful financial gain by putting up the show that for such sincere involvement in business and carrying out the same, his entitlement to the huge sum as an incentive in the form of Input Tax Credit (ITC) flowed which he received having the tendency of foiling the entire move in introducing this new Tax Regime.
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The Income Tax Appellate Tribunal (ITAT), Pune Bench ruled that Deduction under section 80IB(10) of the Income Tax Act, 1961 allowable on the sum received as ‘On-Money’ on flat bookings.
The assessee, M/s. Surana Mutha Bhasali Developers is a builder, promoter, and developer. A survey was conducted during which it transpired that it received on-money amounting to Rs.5.57 crores on flat bookings in the Sri Shantisagar Project, which was not recorded in the books of account. Such a sum was offered for taxation and the return was accordingly filed declaring total income at Rs.5,30,50,000 including the amount surrendered at Rs.5.57 crores. Later on, the assessee filed a revised return declaring total income at Rs.2,79,640 by claiming deduction under section 80IB(10) of the Act amounting to Rs.5,27,70,356 which was not claimed in the original return of income.
The AO called upon the assessee to submit details of Rs.5.57 crores with the name and address of the persons who allegedly gave on-money along with their address etc. The assessee complied with the same and furnished a list of such 42 persons. Thereafter, the AO required the assessee to produce the persons, for which the assessee expressed its inability. The AO issued notices u/s 133(6) of the Act and also recorded statements of 12 persons u/s 131 of the Act, all of whom denied having given any on-money to the assessee. In view of these facts, the AO came to the conclusion that the assessee could not prove that the sum of Rs.5.57 crores was received as on-money on flat bookings, and hence such an amount was not eligible for deduction u/s 80IB(10) of the Act. The CIT(A) echoed the assessment order, against which the assessee has come up in appeal before the Tribunal.
The Coram headed by the Vice President R.S.Syal and Judicial Member S.S. Viswanethra Ravi said that the doctrine of approbate and reprobate does not allow the Department to blow hot and cold in the same breath, thereby accepting one consequence arising from the statement of the assessee while rejecting the other one. When the assessee made a surrender with the clear backdrop of having received `on money’ and the Revenue accepted the same while including it in the total income, it cannot, later on, claim that no deduction u/s 80IB(10) can be granted on the same as the assessee failed to prove that the flat bookers gave such on-money.
“If we accept the viewpoint of the Revenue that source of the income is unexplained and does not pertain to the housing project, then, in the given facts, when there is no positive material other than the assessee’s statement of receiving such an amount as `on money, then there is no income in the first instance calling for its inclusion in the total income. Once it is agreed to be `on money from the flats-bookings at the time of its inclusion in the total income, a fortiori, such an income, being from the sale of flats albeit received as on-money, qualifies for the deduction as well,” the ITAT said.
Therefore, the ITAT overturned the impugned order on this score and ordered a deduction under section 80IB(10) on such an amount.
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The Central Board of Direct Taxes (CBDT) issued the guidelines for taxing partnership firms on its reconstitution in respect of the provisions of section 9B and sub-section (4) of section 45 of the Income-tax Act, 1961.
Section 9B provides for taxation of income of the firm on the transfer of capital assets & stock in trade whereas Section 45(4) now provides for taxation of income in the hands of the firm which is actually the income in the hands of the partner.
The CBDT noticed that the amount taxed under sub-section (4) of section 45 of the Act is required to be attributed to the remaining capital assets of the specified entity so that when such capital get transferred in the future, the amount attributed to such capital assets gets reduced from the value of the consideration and to that extent the specified entity does not pay tax again on the amount. It is further noticed that this attribution is given in the Act only for the purposes of 48 of the Act. It may be seen that section 48 of the Act only applies to capital assets that are forming a block of assets. For capital assets forming a block of assets, there is sub-clause (c) of clause of section 43 of the Act to determine the written down value of the block of asset and section 50 of the Act to determine the capital gains arising on transfer of such assets. However, the Act has not provided that the amount taxed under sub-section (4) of section 45 of the Act can also be attributed to capital assets forming part of a block of assets and which are covered by these two provisions. remove the difficulty, it is clarified that rule 8AB of the Income Tax Rules, 1962 notified vide notification no. 76 dated 02.07.2021 also applies to capital forming part of a block of assets. Wherever the term capital asset is appearing in the rule of the Rules, it refers to a capital asset whose capital gains are computed under section 48 of the Act as well capital asset forming part of a block of assets.
Further, wherever reference is made for the purposes section 48 of the Act, such reference may be deemed to include reference for the purposes of sub clause (c) of clause (6) of section 43 of the Act and section 50 of the Act.
“For the removal of doubt it is further clarified that in case the capital asset remaining with the specified entity is forming part of a block of asset, the amount attributed to such capital asset under rule 8AB of the Rules shall be reduced from the full value of the consideration received or accruing as a result of subsequent transfer of such asset by the specified entity, and the net value of such consideration shall be considered for reduction from the written down value of such block under sub-clause (c) of clause (6) of section 43 of the Act or for calculation of capital gains, as the case may be, of: under section 50 of the Act,” the CBDT said.
The CBDT added, “section 32 of the Act does not allow depreciation on goodwill. If in the given example “self-generated goodwill” is replaced by “self-generated asset”, even then the depreciation will not be admissible on the amount of 230 lakh recognized in valuation. In this regard it may be highlighted that the above-mentioned provisions, in the immediately preceding paragraph, are also applicable to “self-generated asset” and since there is no actual cost to the assessee in case of “self-generated asset”, depreciation is not allowable under section 32 of the Act on an asset whose actual cost is nil.”
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The Income Tax Appellate Tribunal (ITAT), Pune Bench quashed the order for failure to Deduct TDS against Bank of India as it was time-barred.
The assessee, Bank of India accepted deposits from its customers, on which tax was deductible at source under section 194A of the Act. The assessee furnished TDS statements in respect of the four quarters. The AO found certain anomalies therein and observed that in some cases there was no deduction of tax, whilst in others, there was a short deduction of tax on interest payments.
The AO passed the order under section 201(1) read with section 201(1A) of the Act treating it as the assessee in default, raising demand of Rs.2,67,943. The assessee challenged such an order before the CIT(A). It also raised an additional ground before the first appellate authority to the effect that the order passed by the AO was time-barred. The CIT(A) admitted the additional ground but dismissed the same on merits by holding that the order passed in the year 2017 was governed by the then-existing time limit under section 201(3) of the Act as amended by the Finance (No.2) Act, 2014.
The coram of headed by the Vice President R.S. Syal and Judicial Member, S.S. Viswanethra Ravi said that When the proviso to section 201(3) is stipulating for passing of an order before 31.3.2011, which is a period of more than two years as per the sub- section (3), it naturally follows that the ordinary time limit for the passing of the order within the main provision is a period of two years from the end of the relevant financial year in which the TDS statement is filed and it has no relation with the time when the AO takes up the proceedings for passing of an order.
The ITAT held that the order under section 201(1) of the Act was passed beyond the period of two years from the end of the financial year in which the last TDS statement was filed. The same is hereby quashed as time-barred.
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