Benefit of Deduction can’t be given to an Industry If has No Control over Manufacturing Process: Bombay HC [Read Judgment]

A division bench of the Bombay High Court has held that the benefit of deduction under section 80-IB of the Income Tax Act, 1961 cannot be given to an industry if it does not have any direct control over the manufacturing at the factory premises.

The appellants are engaged in manufacturing of electronic computers at Daman and entered into an agreement with M/s. Kobian ECS India Pvt. Ltd. for contract manufacturing of its product. The factory of M/s. Kobian ECS India Pvt. Ltd. is located at Silvassa. The Assessing Officer rejected the appellants’ claim for deduction under Section 80 IB of the Act on the ground that the manufacturing activity undertaken by M/s. Kobian ECS India Pvt. Ltd. for and on behalf of the Appellants was not under its direct supervision and control.

The Tribunal also denied the benefit to the assessee.

Relying on the decision in CIT v. Anglo French Drug Co. (Eastern) Ltd, the appellant contended that for claiming deduction under Section 80 IB of the Act, it is not pre-condition that the Assessee must own factory premises or machinery; but only requirement is that manufacturing activity must be undertaken under the supervision and direct control of the assessee.

The bench comprising Justices M.S. Sanklecha and Sandeep K. Shinde noted that during the appellate proceedings, the assessee could not even produce the primary evidence in the shape of books of accounts, resolutions, even to suggest that it had deployed its manpower at the factory premises of M/s. Kobian ECS India Pvt. Ltd. and had retained the control over the manufacturing activity.

“The Appellants could not produce particulars like attendance register, qualifications of the employees in spite of being asked to do so by the Assessing Officer. In fact, it appears even the packaging material was supplied to contract manufacturer by the Appellants-Company for finished products at Silvassa. All these facts cumulatively leads to hold that the Appellants did not retain control over the manufacturing of the electronic computers at the factory premises of M/s. Kobian ECS India Pvt. Ltd. at Silvassa. In the circumstances, we do not find any reason to interfere with the findings recorded by the Assessing Officer, CIT (A) and the Tribunal.”

Provisions of Deemed Dividend Applicable only to Extent of Accumulated Profits available at the beginning of the relevant FY: ITAT [Read Order]

The Hyderabad bench of the Income Tax Appellate Tribunal ( ITAT ) has held that the provisions relating to deemed dividend under section 2(22)(e) of the Income Tax Act is applicable only to the extent of accumulated profits of the company available at the beginning of the relevant financial year.

The Appellant is a substantial shareholder in M/s. Santoshi Chit Fund Pvt Ltd. The company had taken a Keyman Insurance Policy a few years ago in the name of the Appellant. Subsequently, the company took a loan from LIC against the Keyman Insurance Policy to the extent of Rs. 65,29,750/- and this sum was advanced to the Appellant.

During the course of assessment proceedings, the AO noted that the loan was taken on the premium paid for the Keyman Insurance Policy taken on 31.3.2008. The AO was of the opinion that since the nexus between the loan and advance to the assessee is clearly established and there is accumulated profit of the company available to such an extent, the same is taxable as deemed dividend u/s 2(22)(e) of the Act.

The assessee contended that for applying the provisions of section 2(22)(e) of the Act, the basic condition to be fulfilled is that the company must have advanced loans/ advances from its accumulated profits of the relevant financial year. It was submitted that even from the findings of the CIT (A), the accumulated profit of the company is only to an extent of Rs.4,15,830 and as it was not the sum advanced to the assessee for Keyman Insurance Policy, the same cannot be brought to tax u/s 2(22)e of the Act.

The Tribunal held that “there is a nexus between the loan taken from the LIC and the premium paid for the Keyman Insurance Policy. Since the Keyman Insurance Policy is for the benefit to the assessee, it was held that the same is taxable as deemed dividend u/s 2(22)(e) of the Act. However, as rightly pointed out by the learned Counsel for the assessee, the provisions of section 2(22)(e) of the Act would be applicable only to the extent of accumulated profits of the company available at the beginning of the relevant financial year.”

Tenants can be evicted for not Paying Municipal Taxes: Supreme Court [Read Judgment]

The Supreme Court has held that Tenants in Bengal can be evicted by landlords if they are not paying municipal taxes under the Calcutta Municipal Corporation Act 1980 and the West Bengal Municipal Act 1993.

While answering the Question, “Whether after the amendment of the West Bengal premises Tenancy Act by Amendment Act No. 14 of 2001 with effect from 10th July, 2001 [which had incorporated sub-section (8) to Section 5] whether a tenant who defaults in payment of his/her share of municipal tax as apportioned by the landlord would be in default of rent rendering him/her liable to eviction, the three judge bench comprising of Justice Ranjan Gogoi, Justice R. Bhanumathi and Justice Navin Sinha observed that, with the amendment of the Act with effect from 10th July, 2001 and after incorporation of sub-section (8) of Section 5 the obligation to pay the municipal tax/taxes was specifically cast on the tenant in his/her capacity as an occupier.

With the amendment made to the Act with effect from 10th July, 2001 and upon incorporation of sub-section (8) of Section 5, the obligation to pay municipal taxes as an occupier of the premises fell upon the tenant. The relevant clauses in the rent agreement therefore stood superseded by the statutory obligation cast on the tenant by the amendment to the Act.

While allowing the appeal, the bench also observed that, “the provisions of the 1980 Act make it very clear that an occupier as distinguished from the owner i.e. ‘person primarily liable’ is entitled to pre-assessment notice and to participate in the assessment proceedings and also to question the same by way of an appeal, etc. assessment of a part of the premises in occupation of a tenant or different parts of such premises in occupation of different tenants is not contemplated under the 1980 Act. Rather, from the provisions of Section 230 of the 1980 Act, it is clear that the person to be assessed to tax is the person primarily liable to pay i.e. the owner who is vested with the right to recover the portion of the tax paid by him on behalf of the tenant, if required, proportionately to the extent that the value of the area occupied bears to the value of the total area of the property. Under the 1980 Act, in the event of any default on the part of the owner to pay the tax the rent payable by the tenant(s) is liable to be attached”.

Relief to Traders: Discounts not mentioned in Invoice are allowable as Expenditure, says ITAT [Read Order]

The cash/ trade discounts to the customers are allowable as business expenditure even if the same is not reflected in the invoice, said the Income Tax Appellate Tribunal, Hyderabad bench.

The decision would be a great relief to the traders as the earlier VAT and sales tax laws and the present GST laws do not grant tax relief to the post-sale discounts not mentioned in the invoices.

Assessee, a partnership firm is an authorized dealer of Mahindra & Mahindra Tractors in part of Medak District, is in the business of sale of tractors and its spare parts and is also offering after sales services to the customers. During the relevant period, the assessee has debited an amount of Rs.1,33,44,000/- towards “owners discounts” to trading account. When asked for the details, the assessee submitted that the discount offered at the time of discussion of the price of the tractor and that the invoice includes the discount offered, temporary registration, insurance and extra fittings.

The AO observed that discount is not reflected therein, even though as per the AP VAT Act, 2005 and Sale of Goods Act, 1930, it is mandatory that all discounts and rebates should be mentioned in the invoice. The Assessing Officer had made some enquiries from the customers to find out if they received any discounts from the assessee and found that no such discounts were received by the customers.

On second appeal, the Tribunal found that the assessee has not been confronted with the findings of Assessing Officer’s ex-parte enquiry report.

 “This is in clear violation of principles of natural justice. The assessee has now filed the confirmation from the parties and also relevant material in support of his claim that he has given cash discount to the customers and his explanation as to why it is not included in the invoices is that Mahindra & Mahindra does not allow such discount to be given and therefore, it could not be included in the invoices, but only to ward off the competition, the assessee was constrained to give the cash discount. We find that this evidence goes to the root of the matter and if it is proved that the assessee has given cash discounts, the same is allowable as expenditure. This material is filed before us for the first time. Therefore, we deem it fit and proper to admit the same and remand the issue to the file of the AO for verification and adjudication in accordance with law. Needless to mention that the assessee should be given a fair opportunity of hearing,” the bench said.

Tax Relief cannot be denied to Society for having Objects other than Education: ITAT [Read Order]

The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has said that the tax relief cannot be denied to a society for the reason that there are other objects other than education.

A division bench of the Tribunal was considering an appeal by the Kenchappa Samajika Shikshana Foundation.

The sole grievance of the assessee society was that the AO denied the tax exemptions to the assessee by observing that the society was established not only for the sole purpose of education but also for other objects such as improving the economic standard of the poor people, promote good health for the people through health and nutrition programme etc. he was, therefore, of the opinion that the assessee did not fulfil the conditions laid down u/s exemption u/s 10(23C) (iiiad) of the Income Tax Act.

As the assessee failed to get relief from the first appellate authority, the matter travelled to the Tribunal.

The Tribunal held that “It is undisputed that the assessee was formed as a society. As far as the income in question is concerned, it is undisputed that the income arose solely from the activity of assessee running the educational institution. The exemption u/s. 10(23C)(iiiad) is qua the institution and not qua the assessee. Therefore, the fact that there are other objects other than education, cannot be the basis to deny the claim of the assessee for exemption. As already stated, it is undisputed that the income claimed as exempt arose from the institution providing education. That institution existed solely for the purpose of education and not for the purpose of profit during the relevant previous year. Therefore, the basis for rejecting the claim of the assessee for the exemption that its purpose was not solely for education cannot be sustained,” the Tribunal said.

Anti-Profiteering Charges against Traders if Consumers do not get Benefit of Rate Cuts on 100 items from July: Govt

In a bid to benefit consumers following the recommendations made by GST Council of reducing GST on more than 100 items w.e.f 27.07.2018, the Central Government has decided to initiate anti-profiteering measures against the traders if such benefit was not passed on to the consumers.

On 21 July, the goods and services tax on washing machines, small televisions and air conditioners, as well as other goods, was reduced from 28% to 18%. However, there were questions that whether manufacturers pass on the full benefit to customers or retain some of it as their profit.

Consequent to the above GST rate reductions, the Ministry of Consumer Affairs, Food & Public Distribution has granted permission under Rule 33(1) and Rule 6(3) of the Legal Metrology (Packaged Commodities) Rules, 2011, for making corrections in retail sale price (MRP) by way of stamping or putting sticker or online printing, for declaring the reduced MRP on such pre-packaged commodities. However, the earlier Labelling/Sticker of MRP will continue to be visible.

This relaxation will apply in the case of manufactured/packed/imported unsold stocks where the MRP would reduce due to reduction in the rate of GST w.e.f 27th July, 2018. This relaxation would be applicable upto 31st December, 2018.

In a recent advisory, the Central Board of Indirect Taxes and Customs ( CBIC ) has advised the stakeholders to assist the GST officers in ensuring that the benefit of reduced GST is passed on to the consumers.

“If benefits of reduced GST rates are not passed on, affected consumer(s) may file the application, before the Standing Committee on Anti-profiteering if the profiteering has all-India character, OR before the State level Screening Committees if the profiteering is of local nature,” the Board said.

No Tax Exemption if Agricultural Land was declared as Industrial Plot during Registration of Sale Deed: ITAT [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Delhi bench has held that income tax is payable on the sale of agricultural land if the same was declared as the industrial plot by the competent authorities at the time of the registration of sale deed.

The division bench, while dismissing an appeal by the assessee, also clarified that the fact that the land was agricultural land at the time of ‘Agreement to Sale’ would have no relevance in such circumstances.

The assessee is an agriculturist and sold agriculture land and agriculture activity was done on the land at the time of transfer of agricultural land. An agreement to sell the same was executed without transferring the possession. However, as per the sale deed, the properties in question have been referred as “industrial plot” for industrial purposes. In the sale deed, it is also mentioned that the plot under sale has been declared as the industrial area by Khurja Development Authority as per master plan.

During the course of the assessment proceedings, the Assessing Officer denied the capital gain exemption to the assessee and held that the gain in respect of the sale is taxable as long-term capital gain.

On appeal, the CIT(A) confirmed the order.

On second appeal, the Tribunal noted that the possession of the property in question was not transferred at the time of Agreement to Sale. “After the Agreement to Sale the SDM vide order dated 26.02.2009 changed the land use and declared the land as non-agricultural. The sale deed dated 24.03.2009 was registered thereafter. It is therefore clear that the sale transaction was completed on the execution of the sale deed and at that time the land had acquired the character of the non-agricultural land. Thus, on the date of sale, the land in question was not an agricultural land. The same would qualify to be considered as capital assets u/s 2(14) of the Income Tax Act.”

The bench further noted that the Jot chankbandi document is not relevant on the face of the findings of fact recorded above. “The sale deed in question is executed by the assessee and is the document produced by the assessee. The assessee is therefore bound by the contents of the registered sale deed. The Agreement to Sale has no relevance to the matter in issue on the execution of the registered sale deeds. Since prior to the sale of the property in question, it was declared as the industrial plot by the competent authority, therefore, it could not assume the character of agriculture land. Since the industrial plot was sold by the assessee, therefore, it was correctly considered as capital assets for the purpose of computing long-term capital gain,” the bench said.

Homebuyers to be part of Insolvency Process: SC Orders Fresh bids for Jaypee Infra [Read Judgment]

While allowing a bunch of petitions in the Jaypee Infratech matter, the Supreme Court ordered a fresh round of bidding for the company but barred the parent Jaiprakash Associates or its promoters from participating in it.

The recently amended bankruptcy code classifies home buyers as financial creditors, and get to decide on a company’s future along with lenders. In the light of this, the Court also ordered the reconstitution of the company’s Committee of Creditors.

A division bench including Chief Justice Deepak Misra said that the insolvency proceedings against Jaypee Infratech will be dealt with by the Allahabad bench of the National Company Law Tribunal (NCLT).

The three-judge bench comprising Chief Justice Dipak Misra and Justices AM Khanwilkar and DY Chandrachud, said that the insolvency resolution process for Jaypee Infratech will be deemed to have started afresh from today for a period of 180 days.

The National Company Law Tribunal may extend this period by up to 90 days if necessary, the bench said. The insolvency resolution professional has been ordered to invite fresh bids but both Jaiprakash Associates and Jaypee Infratech have been barred from participating.

The Court also allowed the Reserve Bank of India to direct banks to take JAL to bankruptcy courts.

“JIL/JAL (Jaypee Infratech/Jaiprakash Associates) and their promoters shall be ineligible to participate in the CIRP by virtue of the provisions of Section 29A. RBI is allowed, in terms of applications to this Court to direct the banks to initiate corporate insolvency resolution proceedings against JAL under IBC,” the Supreme Court said.

“The amount of Rs 750 crore which has been deposited in this court by JAL/JIL shall together with the interest accrued thereon be transferred to the NCLT and continue to remain invested and shall abide by such directions as may be issued by the NCLT,” the order said.

Govt clarifies Applicability of GST on ITIs [Read Circular]

The Central Board of Indirect Taxes and Customs ( CBIC ) has clarified the applicability of the Goods and Services Tax ( GST ) on the Industrial Training Institutes.

With regard to the applicability of the GST on vocational training provided by private ITIs in designated trades and in other than designated trades, it was clarified that Private ITIs qualify as an educational institution as defined under para 2(y) of notification No. 12/2017-CT(Rate) if the education provided by these ITIs is approved as vocational educational course. It was said that as per the notification, services provided by a private ITI in respect of designated trades notified under Apprenticeship Act, 1961 are exempt from GST. “As corollary, services provided by a private Ill in respect of other than designated trades would be liable to pay GST and are not exempt,” the circular said.

It was further clarified that in case of designated trades, services provided by a private ITI by way of conduct of entrance examination against consideration in the form of entrance fee will also be exempt from GST.

The Board clarified that service provided by a private Industrial Training Institute for conduct of examination against consideration in the form of entrance fee and also on the services relating to admission to or conduct of examination. “Further, in respect of such designated trades, services provided to an educational institution, by way of, services relating to admission to or conduct of examination by a private ITI will also be exempt [Entry (b(iv)) under Sr. No. 66 of notification No. 12/2017-CT(Rate) refers]. It is further clarified that in case of other than designated trades in private ITIs, GST shall be payable on the service of conduct of examination against consideration in the form of entrance fee and also on the services relating to admission to or conduct of examination by such institutions, as these services are not covered by the exemption ibid,” it said.

It also pointed out that in case of Government ITIs, the services provided by a Government ITI to individual trainees/students, is exempted from taxation as these are in the nature of services provided by the Central or State Government to individuals.

Such exemption in relation to services provided by Government ITI would cover both — vocational training and examinations conducted by these Government it is, it said.

GST Compensation worth Rs. 52077 cr paid to States and UTs, says Shiv Pratap Shukla

Details of GST Compensation released to States/UTs for FY 2018-19

This was stated by Shri Shiv Pratap Shukla, Minister of State for Finance in a Written reply to a question in Lok Sabha today.

Govt notifies Due Dates for Filing GSTR-1 from July to March 2019 [Read Notification]

The Central Board of Indirect Tax and Customs (CBIC) has notified the due dates for filing GSTR-1 for the taxpayers with the aggregate turnover of upto Rs.1.5 crores and with an aggregate turnover of more than Rs. 1.5 crores for the months of July 2018 to March 2019.

As per a notification issued by the Board Today, the due dates for quarterly furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover of up to Rs.1.5 crores for the periods July – September 2018, October – December 2018 and January – March 2019 shall be filed within 31st October, 31st January and 31^st March respectively.

The due dates for the furnishing of FORM GSTR-1 for those taxpayers with an aggregate turnover of more than Rs. 1.5 crores for the months from July 2018 to March 2019 is till the eleventh day of the month succeeding such month.

GSTR 3B from July to March 2019 required to be filed by 20th of Next Month [Read Notification]

The Central Government has notified that the Form GSTR 3B for each month from July 2018 to March 2019 required to be filed by 20th of next month.

A Notification issued by the Central Board of Indirect Taxes and Customs (CBIC) has said that “the return in FORM GSTR-3B of the said rules for each of the months from July, 2018 to March, 2019 shall be furnished electronically through the common portal, on or before the twentieth day of the month succeeding such month.”

“Every registered person furnishing the return in FORM GSTR-3B of the said rules shall, subject to the provisions of section 49 of the said Act, discharge his liability towards tax, interest, penalty, fees or any other amount payable under the said Act by debiting the electronic cash ledger or electronic credit ledger, as the case may be, not later than the last date, as specified in the first paragraph, on which he is required to furnish the said return,” the Notification said.

GSTR-3B is a monthly return. All regular taxpayers need to file this return till June 2018. Taxpayers can file their return on GST Portal. Taxpayers have to file this return by 20th of the subsequent month.

CBIC clarifies GST Rates on various Goods and Services [Read Circular]

The Central Board of Indirect Taxes and Customs ( CBIC ) has issued clarifications for applicability of GST on various goods and services.

With regard to the GST rate applicable on refined beet and cane sugar, it was clarified that beet and cane sugar, including refined beet and cane sugar, will fall under heading 1701 and attract 5% GST rate.

It has clarified that fortified toned milk would attract nil rate of GST.

Regarding the GST rate on treated (modified) tamarind kernel powder and plain (unmodified) tamarind kernel powder, the Board said that “As both plain (unmodified) tamarind kernel powder and treated (modified) tamarind kernel powder fall under chapter 13, it is hereby clarified that both attract 5% GST in terms of the said notification.”

It was further clarified that the supply of drinking water for public purposes if it is not supplied in a sealed container, is exempt from GST.

With regard to the applicability of GST rate on Human Blood Plasma, it was said that a harmonious reading of the two relevant entries would mean that normal human plasma would attract 5% GST rate under List I (S. No. 186), whereas plasma products would attract 12% GST rate, if otherwise not specifically covered under the said List.

It also said that the baby wipes, facial tissues, and other similar products would attract 18% GST rate. Similarly, if they are coated with soap or detergent, then it would fall under HS code 3401 and would attract 18% GST.

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Fertilizers supplied for use in Manufacture of Other Fertilizers attract 5% GST: CBIC [Read Circular]

The Central Board of Indirect Taxes and Customs ( CBIC ) has clarified that the fertilizers supplied for direct use as fertilizers, or supplied for use in the manufacturing of other complex fertilizers for agricultural use (soil or crop fertilizers), will attract 5% IGST.

In a circular issued last day, the Board pointed out that in the GST regime, tax structure on fertilizers has been prescribed on the lines of pre-GST tax incidence. The wording of the GST notification is similar to the central excise notification except certain changes to meet the requirements of GST. These changes were necessitated as GST is applicable on the supply of goods while central excise duty was applicable on manufacture of goods. Accordingly, fertilizers falling under heading 3102, 3103, 3104 and 3105, other than those which are clearly not to be used as fertilizers, attract 5% GST [S. No. 182A to 182D of the First schedule to the notification No.1/2017-Central Tax (Rate) dated 28.06.2017].

“However, the fertilizers items falling under the above mentioned headings, which are clearly not to be used as fertilizer attract 18% GST [S. No. 42 to 45 of the III schedule to the notification No. 1/2017 Central Tax (Rate)]. The intention has been to provide concessional rate of GST to the fertilizers which are used directly as fertilizers or which are used in the manufacturing of complex fertilizers which are further used as soil or crop fertilizers. The phrase “other than clearly to be used as fertilizers” would not cover such fertilizers that are used for making complex fertilizers for use as soil or crop fertilizers,” the Board said.

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GST payable on Net Quantity of Petroleum Gases retained for Manufacture of Petrochemical and Chemical Products, says CBIC [Read Circular]

The Central Board of Indirect Taxes and Customs ( CBIC ) has clarified that, GST will be payable by the refinery only on the net quantity of petroleum gases retained by the recipient manufacturer for the manufacture of petrochemical and chemical products.

In the Circular issued by the department, It reiterated that clarifications on similar issues for specific products have already been issued vide circular Nos. 12/12/2017-GST dated 26th October, 2017 and 29/3/2018-GST dated 25th January, 2018. These circulars apply mutatis mutandis to other cases involving same manner of supply as mentioned in these circulars.

While clarifying the issue, whether in this transaction GST would be leviable on the whole quantity of the principal raw materials supplied by the oil refinery or on the net quantity retained by the manufacturers of petrochemical and chemical products, the CBIC said that, The GST Council in its 28th meeting held on 21.7.2018 discussed this issue and recommended for issuance of a general clarification for petroleum sector that in such transactions, GST will be payable by the refinery on the value of net quantity of petroleum gases retained for the manufacture of petrochemical and chemical products.

The CBIC also said that, “the refinery would be liable to pay GST on such returned quantity of petroleum gases, when the same is supplied by it to any other person. It is reiterated that this clarification would be applicable mutatis mutandis on other cases involving supply of goods, where feed stock is retained by the recipient and remaining residual material is returned back to the supplier. The net billing is done on the amount retained by the recipient”.

Once a Research Facility is Approved, Weighted Deduction can’t be denied for want of Form 3CL: ITAT [Read Order]

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) in the case of Century Seeds Pvt. Ltd. v. DCIT ordered that once a research facility is approved, weighted deduction can’t be denied for want of Form 3CL.

The present case in its scrutiny by the CASS and Assessing Officer (AO) after completing its assessment determined the total income in excess of what was disclosed by the assessee in its return. Thereafter the Commissioner of Income Tax (CIT) invoked its jurisdiction u/s 263 of the Act and issued show cause notice to the assessee directing submission of form 3CM order of approval of in-house research and development facility by DSIR and Form 3CL in which the prescribed authority (DSIR) certify the expenditure which entitle the assessee to avail weighted deduction. However, the assessee did not submit any details in Form 3CM and 3CL report. In the absence of mandatory Form 3CM and Form 3CL, allowance of weighted deduction cannot be given. The AO allowed this allowance, without complying the related provisions of law, as mentioned above. Since the AO has not brought anything on record about this allowance, the same has to be treated as non-application of mind.

The issue arisen in the present appeal is that whether the jurisdiction exercised by Ld Principal Commissioner of Income Tax (Pr. CIT-2), Hyderabad u/s 263 vide his order dated 27/03/2017 is valid or not.

The Tribunal after perusing the material on record and the contentions raised by the parties was of the opinion that the Form is to be sent by DSIR to DIT (E). It is an internal mechanism before two Government Departments on which assessee has no role or control, except filing the necessary application with DSIR which assessee complied. So, non-filing of Form 3CL by assessee does not arise in such a situation. Furthermore, the Tribunal was of the opinion that the AO had correctly allowed the deduction and there is no “error” in the order passed by AO u/s 143(3). Once a research facility is approved, entire expenditure incurred on Department of R & D has to be allowed weighted deduction as provided u/s 35(2AB). Hence, allowing the appeal, the Tribunal held that the filing of Form 3CL by assessee does not arise.

Only 0.35% Cases Selected for Income Tax Scrutiny: CBDT Chief

In a relief to the taxpayers, the Chairman of the Central Board of Direct Taxes (CBDT), Sushil Chandra has confirmed that the Income Tax department is taking up a fewer Income Tax Returns for the scrutiny.

In 2017-18, the tax department picked up for scrutiny only 0.35% of all tax returns, compared with 0.8-1% in the previous years, the CBDT Chief said.

The lower percentage of scrutiny means the department is looking at more non-intrusive ways to check tax evasion. “Of the 0.35% cases picked up, around 0.15% were picked up for limited scrutiny. Only 0.2% of cases were picked up for full scrutiny,” Chandra said at a conference organized by the Associated Chambers of Commerce and Industry of India.

“This shows the faith the tax department has in taxpayers. But it doesn’t mean that tax evaders can go scot-free,” Chandra said, adding that technology will be used to mine data to identify tax evaders. Further, the enforcement unit is also strengthened to curb tax evasion.

The government had filed 4,700 prosecution cases in 2017-18, as against 1,200 the previous year and 500 in the year before that, Chandra said.

The taxpayer base has also expanded. The government received 68.6 million income tax returns in 2017-18, against 54.3 million in 2016-17. This number is expected to substantially increase this year as the implementation of goods and services tax helps improve compliance on the direct tax side due to the greater formalization of the economy.

Lok Sabha passes GST Amendment Bills [Read Bills]

The Lok Sabha has passed four bills amending laws relating to the Goods and Services Tax (GST). The Central GST (Amendment) Bill, Integrated GST (Amendment) Bill, Union Territory GST (Amendment) Bill and GST (Compensation to States) Amendment Bill were tabled in the lower House of Parliament on Tuesday.

Once implemented, the amendment will make return forms simpler and raise the turnover threshold for availing composition scheme to ₹1.5 crore.

Finance Minister Piyush Goyal said the amendment Bills, i.e., the Central GST (Amendment) Bill, the Integrated GST (Amendment) Bill, the GST (Compensation to States) Amendment Bill and the Union Territory GST (Amendment) Bill, were primarily aimed at helping the MSME sector and small traders.

Receipts for Exercising Voting Rights in a Company is not Taxable: Calcutta HC [Read Order]

A division bench of the Calcutta High Court has held that the receipts for exercising the voting rights in a Company is not taxable under the Income Tax Act as the same amounts to capital receipt.

The assessee is a non-banking financial company. Tyco, USA had a tie-up with the RPG group of companies for the manufacture and sale of certain industrial products in India. As per the agreement, the Indian company responsible for manufacturing and selling the products was by the name of RPG Raychem Limited, which was a joint venture between the RPG group in India and Tyco, USA. The assessee holds 50% of the paid up capital in RPG Raychem Limited.

Upon the relaxation of rules for foreign entities conducting business in India, Tyco, USA licensed the right to manufacture and sell the relevant industrial products in India to two its subsidiaries. These subsidiaries sought the assistance of the assessee, in this case, to ensure that RPG Raychem Limited did not continue rival business in the same industrial products in India. Accordingly, an agreement was entered into by the relevant subsidiaries of Tyco, USA under which the assessee was to vote in a particular manner at a general meeting of RPG Raychem Limited such that Tyco’s specialised business was no longer carried on in India by RPG Raychem Limited. In consideration for voting in the manner agreed, Tyco, Dubai paid certain sums to the assessee.

The Assessing Officer held that the payment received by the assessee for exercising its voting rights in a company in a particular manner would constitute revenue receipt and thus, is taxable.

On appeal, the assessee contended that the income had to be treated as a capital receipt since it was one-time in nature and not a recurring source of income.

The Appellate Tribunal relied on a judgment of the Bombay High Court in Old Spice case and held that the income had to be treated as a capital receipt.

and found it to be applicable in the facts and circumstances of the assessee’s matter.

Upholding the order of the Tribunal, the bench comprising Justices Sanjib Banerjee and Abhijit Gangopadhyay has held that “the Appellate Tribunal’s treatment of the matter, particularly, in the light of the judgment of the Bombay High Court, does not call for any reconsideration. The Tribunal appropriately held that since the income was one-off in nature and arose in the context of the appellant, through a company in which the appellant had substantial control, relinquishing a right, it ought to be treated as a capital receipt and not a revenue receipt.”

Cabinet approves signing of MoU between India and Canada on collaboration among Chartered Accountant Institutions

The Union Cabinet chaired by Prime Minister Shri Narendra Modi has approved the signing of the “Memorandum of Understanding (MoU)” between “Institute of Chartered Accountants of India (ICAI)” and “Chartered Professional Accountants of Canada (CPA Canada)”.

Approval of the Cabinet has been granted in respect of Ex-post facto approval of the MoU signed in 2011 and approval for signing of MoU between ICAI, India and CPA, Canada and the MoU envisages arrangements for reciprocal membership that will apply to the respective members of both the Institutes subject to specified criteria. The MoU also includes further collaboration on the definition, learning, and evaluation of the professional qualities and skills and competencies of entry-level Chartered Accountants.

The aim is to work together to develop a mutually beneficial relationship in the best interest of ICAI members, students and their organizations. The MoU will provide an opportunity to the ICAI members to expand their professional horizon and simultaneously ICAI will become an entity to aid strengthen brand building of local nations. The MoU will foster strong working relations between the ICAI & CPA Canada.

The MoU would help encourage more and more young Indian Chartered Accountants to take up the recognition of “CPA Canada” professional designation to further help them pursue professional opportunities in Canada. A number of Indian Chartered Accountants are holding top level positions in Canadian companies and with the recognition from CPA Canada, the Canadian Corporates would trust Indian talent and skills more and proceed to hire them.

The MoU will apply to members of good standing who have gained membership in the ICAI or one of the Canadian Provincial CPA bodies by meeting the education, examination and practical experience requirements of the ICAI or the Canadian Provincial CPA bodies respectively. This agreement does not automatically apply to individuals who have gained membership of the ICAI or the Canadian Provincial CPA Bodies through another agreement with a third party.

 ICAI is a statutory body established by an Act of Parliament of India, The Chartered Accountants Act, 1949′, to regulate the profession of Chartered Accountancy in India. “CPA Canada” Institute is the national organization established to support a unified Canadian accounting profession.

Gujarat HC directs IT Dept to enable Online Filing of Returns without Aadhaar [Read Order]

The Gujarat High Court has directed Income Tax Department to enable Online Filing of Returns without Aadhaar.

A Division Bench comprising of Justice M.R Shah and Justice A.Y. Kogje has directed the Income Tax department to accept ITR of a lawyer Mr. Khemchand Rajaram Koshti, who had filed the petition.

The Bench also noted that the Aadhaar matter is pending before the Supreme Court.

The Court said that, “The Department may accept the same without the petitioner linking his PAN card with AADHAR card or having to make a declaration that he has applied for one”.

“It is clarified that mere filing of the return would not create any equity in favour of the petitioner and this arrangement would be subject to further final order that may be passed in this petition”, the Court also said.

Recently, Delhi, Bombay and Madras High Courts has directed the income tax department to enable filing of IT returns electronically without linking with Aadhaar.

Section 139AA was incorporated to the Income Tax Act vide Finance Act, 2017 requiring mandatory quoting of Aadhaar or enrolment ID of Aadhaar application form for filing of income tax returns and making application for allotment of PAN (Permanent Account Number) with effect from July 1 this year. as per the provision, non-enrolment of Aadhaar by July 2017 would render the PAN of the defaulting individual invalid, attracting serious consequences under the Income Tax Rules.

Recently, Supreme Court of India has dismissed 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.