While quashing the levy of import fee levied on distilleries, a division bench of the Himachal Pradhesh High Court held that the levy is ultra vires to the Constitution.
A bench of Justices Tarlok Singh Chauhan and Chander Bhusan Barowalia was hearing two writ petitions wherein the petitioners challenged the levy of license fee on distilleries.
While the State failed in the “quid pro quo”, the High Court quashed the relevant Notification issued by the State Government for the purpose of levying permit fee on distilleries & breweries on import / transport of ‘malt spirit of over proof strength’ into the State, as same does not constitute “alcoholic liquor for human consumption” within ambit of any regulation or control of State Govt. under List II of Seventh Schedule.
Before the Court, the Revenue contented that fee was payable since said spirit became portable and fit for human consumption by subsequent dilution.
The bench noticed the Apex Court decision in Vam Organic Chemicals Ltd & Ors. wherein it was held that State cannot legislate in respect of industrial alcohol despite the fact that same has potential to be used to manufacture alcoholic liquor.
Explaining the concept of ‘quid pro quo’, the bench noticed that in instant case, State Govt. had not undertaken any supervisory activity which constituted “quid pro quo” for imposition of import fee, and Revenue had failed to co-relate the amount of fee levied with expenses incurred for rendering the services.
Following a catena of decisions, the bench ruled that “the State Government cannot claim to have power to legislate on alcohol of “malt spirit of overproof strength” merely on the ground that the same can be made potable after dilution. The State at best can only lay down regulations to ensure that non-potable alcohol is not diverted and misused as a substitute for potable liquor.”
Read the full text of the Judgment below.
In a significant ruling, Justices S Muralidhar and Prathba M Singh has granted an interim relief to the petitioners to import goods without payment of Integrated Goods and Services Tax (IGST) to the extent of advance authorization scrip obtained by them prior to July 1st.
The order would be a major relief to the exporters who are under a threat of losing working capital on a daily basis due to the payment of IGST post implementation of the Goods and Services Tax (GST).
The petitioner, in the instant case was granted with Advance Authorization as per the Foreign Trade Policy 2015 – 2020.
In terms with the FTP, the Advance Authorization licence is issued to a manufacturer exporter or merchant exporter having past export performance in at least two preceding financial years.
The petitioners were aggrieved with the Notification No. 26/2017-Customs dated 29th June 2017, issued by the Government post GST regime, wherein an additional levy of IGST was made for imports made after 1 st July 2017.
The grievance of the Petitioner is that it holds export orders placed on it prior to 1st July 2017 for the fulfilment of which it has to undertake imports of inputs. According to them, with the change brought about by the GST regime, the Petitioner would have no option but to pay IGST out of its sources causing a working capital blockage. The Petitioner would have to rely upon borrowings as it has already exhausted its overdraft limits with the banks. The prospect of the IGST being ultimately refunded some time in future is of little consolation to the Petitioner who seeks liquidity to discharge the additional levy of IGST failing which its imports will get blocked.
It is in this factual background, the petitioners impugned the the applicability of levy of IGST even to imports that are made for fulfilment of export orders that have been placed on and accepted by the Petitioner prior to 1st July, 2017. Also, the Petitioner is seeking to only avail the credit outstanding in respect of advance authorizations issued to the Petitioner prior to 1st July 2017.
The Court, being satisfied that there is prima facie case in the petitioners case, directed the Government to allow the Petitioner to continue making the imports under the Advance Authorization licenses issued prior to 1st July, 2017in terms of their quantity and value subject to terms.
Accordingly, it made the following directions.
Advocates Abhishek Rastogi and Rashmi Deshpande from Khaitan & Co appeared for the petitioners.
Read the full text of the Order below.
In a concept note prepared by the National Academy of Customs, Indirect Taxes & Narcotics, the Central Board of Excise and Customs (CBEC) has said that many of the activities of charitable institutions and religious trusts are subject to the Goods and Services Tax (GST).
As per the present law, services by an entity registered under Section 12AA of Income-Tax Act, 1961 by way of charitable activities” is exempt from whole of the GST subject to two conditions. Firstly, Entities must be registered under Section 12AA of the Income Tax Act, and secondly, Such services or activities by the entity are by way of charitable activities.
For this activities, the term ‘charitable activities’ means public health, advancement of religion, spirituality or yoga, advancement of educational programmes or skill development, preservation of environment including watershed, forests and wildlife etc.
Services provided by charitable and religious trust which are not considered as charitable activities come under the GST net. The indicative list of such services could be renting of premises by such entities, grant of sponsorship and advertising rights during conduct of events/functions etc.
a limited exemption to renting of only religious precincts or a religious place meant for general public by the entity registered under Section 12AA of the Income Tax Act subject to the provisions of the Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017.
Subscribe Taxscan Premium to view the JudgmentBihar Deputy Chief Minister Sushil Kumar Modi to head the GOM while Committee on Exports to be headed by the Revenue Secretary, Dr.Hasmukh Adhia.
In pursuance of decision taken in the 21st Meeting of GST Council held on 9th September, 2017 at Hyderabad, the Union Finance Minister, Arun Jaitley today constituted a Group of Ministers and a Committee on Exports.
The Group of Ministers (GoM) has been constituted under the convenorship of the Deputy Chief Minister of Bihar, Sushil Kumar Modi,in order to monitor and resolve the IT challenges faced in the implementation of GST. The Members of the GoM are Shri Amar Agarwal, Minister for Commercial Taxes, Government of Chhatisgarh; Shri Krishna Byregowda, Minister for Agriculture, Government of Karnataka; Dr. T.M. Thomas Isaac, Finance Minister, Government of Kerala and Shri Etela Rajendar, Finance Minister, Government of Telengana. The GoM will be assisted in its work by the Chairman, Goods and Services Tax Network (GSTN) and the Chief Executive Officer, GSTN.
The Committee on Exports has been constituted under the convenorship of the Revenue Secretary to look at the issues of export sector and to recommend to the GST Council suitable strategy for helping the export sector in the post-GST scenario. This Committee consists of the Chairperson, CBEC; Member (Customs), CBEC; Director General, DGFT; Addional Secretary, GST Council; Director General, DG Export Promotion from the Central Government and Commissioners of Commercial Taxes from the States of Gujarat, Maharashtra, Karnataka, Uttar Pradesh and West Bengal.
Pursuant to the action of the Ministry of Corporate Affairs of cancellation of registration of around 2.10 lakh (2,09,032) defaulting companies and subsequent direction of the Ministry of Finance to banks to restrict operations of bank accounts of such companies by the directors of such companies or their authorized representatives, the Ministry of Corporate Affairs has identified 1,06,578 Directors for disqualification under Section 164(2)(a) of the Companies Act, 2013 as on September 12, 2017.
Ministry of Corporate Affairs is further analyzing the data of these companies available with the Registrar of Companies to identify the Directors and the significant beneficial interests behind these companies. Profiles of Directors such as their background, antecedents and their role in the operations/functioning of these companies are also being compiled in collaboration with the enforcement agencies.
The money laundering activities performed under the aegis of these companies are also under the scanner. The Professionals, Chartered Accountants/Company Secretaries/Cost Accountants associated with such defaulting Companies and involved in illegal activities have been identified in certain cases and the action by Professional Institutes such as ICAI, ICSI and ICoAI is also being monitored.
The above exercise is part of the strategy formulated by the Ministry of Corporate Affairs and presented to the Union Finance Minister, Shri Arun Jaitley and the Minister of State for Corporate Affairs Shri P.P. Chaudhary. The Minister of State Shri Chaudhary is closely monitoring the situation emerging-out of cancellation of registration of such companies under the Companies Act, 2013. He is holding regular meetings with the officials of the Ministry of Corporate Affairs and its subordinate organizations such as Serious Fraud Investigation Office (SFIO), Registrars of Companies (ROCs), Department of Financial Services, Indian Banks Association and other Departments involved in the crackdown against such companies.
MOS (CA) Shri Chaudhary said that all the concerned agencies are handling this issue on priority. He said “The present Government has vowed to fight Black Money and fighting the menace of Shell Companies is an imperative element of such fight. The fight against black money shall be incomplete without breaking the network of shell companies. Possibility of using the Shell companies for laundering the black money cannot be undermined.
I am happy that all the concerned agencies are handling this issue on priority. The disqualification under Section 164 of the Act is by operation of law. We are identifying the defaulting Directors of these shell companies. My officers have assured me that by the end of this month, we would be ready with the relevant details of all defaulting Directors of these shell companies.
This whole exercise shall go a long way in creating an atmosphere of confidence and faith in the system paving the way for ease of doing business in India. The interest of stakeholders would be protected and the image of the country in the global business arena and fora would substantially improve.”
It may be recalled that as per Section 164 of the Companies Act, 2013, any person who is or has been a director in a company which has not filed financial statements or annual returns for any continuous period of three financial years shall not be eligible for re-appointment as a director in that company or appointed in other company for a period of five years from the date on which the said company fails to do so. Also, Section 248 of the Act provides that, the liability, if any, of every director, manager or other officer who was exercising any powers of management and of every member of the de-registered/dissolved company, shall continue and may be enforced as if the company had not been de-registered/dissolved. Further, Section 167 of the Act provides that on suffering the aforesaid disqualification, the Director shall vacate the office.
It may be noted that prior to action against defaulting companies, there were about 13 Lakh companies in the Registry. However, after closing of around 2.10 Lakh Companies, there are about 11 Lakh companies having Active status in the Registry.
The Income Tax Appellate Tribunal (ITAT), Bangalore, in a recent ruling, held that the amount paid towards chit loss cannot be treated as interest payments, and therefore, in such cases, there is no need to deduct tax at source.
Assessee, an individual engaged in the business of civil construction, dealer in real estate, petroleum products and allied business.
Assessing Officer, in the instant case, disallowed a sum of Rs.2,27,964/- claimed by the assessee by invoking section 40(a)(ia) of the Income Tax Act on ground that assessee failed to deduct tax at source u/s. 194A. Assessee contended that the amount debited in the name of MCI Leasing Ltd. is not interest payments, but loss on subscription to chit, therefore, the provisions of section 194A has no application.
Accepting the contentions of the assessee, the bench noted that the AO has made addition merely on the basis of ledger extract filed by the assessee on the assumption that the said payments are interest payments which attracts TDS under the provisions of section 194A of the Act, without conducting further enquiries in the background of the assessee’s claim that the said payments are loss from subscription to chits.
“The AO should have conducted necessary enquiries before making the disallowance u/s. 40(a)(ia). The AO has not exercised his option to conduct the necessary enquiries and made the addition purely on suspicion and surmises, based on the ledger extract ignoring the evidence filed by the assessee to claim that the said amount is loss on account of chit which was wrongly booked under the head interest payment to MCI Leasing Ltd. At the same time, the assessee, though claims said payment is not interest, but chit loss, failed to furnish required evidence. If payment to MCI Leasing Ltd. is on account of chit loss, then, the question of TDS does not arise. Consequently, no disallowance of expenditure u/s. 40(a)(ia).”
Read the full text of the Order below.
A division bench of the Mumbai ITAT, in ITO v. Balabhai Nanavati Hospital, held that the expenditure on account of AMC of medical equipments etc., is not in the nature of fee for professional and technical services as construed u/s 194J of the Act and hence, not liable to deduct TDS under Section 194J of the Income Act.
Assessee, a hospital, has made payments under annual maintenance contract in respect to equipments like X-ray Machines, HD dialysis machines, CT Scanner, Olympus Endoscopes, MRI Scanner, Axiomo arties FC and other medical equipments and it is making payments as per regular AMC’s. Assessee deducted TDS in respect of such payments under section 194C of the Income Tax Act.
On appeal, assessee maintained that the practice of AMC and TDS on such payments is established fact that the assessee is deducting TDS u/s 194C of the Act and this position is duly recognized by the Revenue for passed several years.
After analysing the Annual Maintenance Contract, the bench noted that it is evident that AMC is necessary to keep medical equipments and other hospital equipments in good working condition and this process is normally carried out by skilled mechanics and not any qualified technician.
“We find that though these AMCs assessee is carry out routine normal maintenance which is covered by the provisions of section 194C and not as if technical services covered u/s 194J of the Act. This issue is covered by the decision of co-ordinate Bench of Mumbai Tribunal in the case of DCIT (TDS)-1(1) vs. Asian Heart Institute & Research Centre Pvt. Ltd. in ITA No. 7051 & 7177/Mum/2012 for the AY 2008-09 and others following the decision of Ahmedabad bench decision in the case of Nuclear Power Corporation Ltd and holding that the annual maintenance charges are payment in the nature of contractual payments and will fall under section 194 C of the Act.”
In view of the above facts and circumstances, we are of the view that the expenditure on account of AMC of medical equipments etc., is not in the nature of fee for professional and technical services as construed u/s 194J of the Act and hence, not liable to deduct TDS u/s 194J of the Act. The assessee has deducted TDS u/s 194C of the Act in regard to payments on AMC of medical equipments and machines etc.
Read the full text of the Order below.
In M/s Essel Propack Ltd v. ACIT, a division bench of the Mumbai ITAT, while allowing the loss suffered on cancellation of forward contracts held that the same amounts to business loss.
The bench also clarified that a currency cannot be termed as a commodity for the purpose of the provisions of Section 43(5) of the Income Tax Act which defines the term ‘speculative transactions’.
Assessee debited a sum of Rs.1,40,84,283/- in respect of the loss on account of cancellation of the forward contract. On enquiry, assessee explained that it is a multinational company and 50% raw materials are imported and 10% sales are exports. The foreign exchange risks are hedged using forward contracts on the basis of underlying purchases, sale contracts. According to them, the definition of speculative transactions under section 43(5) is an exhaustive one and the term does not include currency.
The Assessing Officer, however, rejected the contention and completed assessment by treating the loss on cancellation of the forward contract as loss arising from speculation activities.
The bench noted that as per the definition given in sub-section (5) the transaction entered into cannot be treated to a speculative transaction. Accepting the contentions of the assessee, it observed that the definition of speculative transactions under section 43(5) is an exhaustive one and the term ‘commodity’ including shares and stocks but does not include currency.
Citing a plethora of decisions, the bench ruled that the loss suffered by assessee on cancellation of such forward contracts is not speculative and loss is deductible as business loss.
Read the full text of the Order below.
The Central Government, last day, extended the due date for filing of returns for the month of July by Input Service Distributor to October 13th.
Earlier, the Input Service Distributor were allowed to file returns till 8th September.
Input Service Distributor under GST Model includes an office of the supplier of goods and / or services which receives tax invoices issued by supplier towards receipt of input services and/or goods and issues a prescribed document for the purposes of distributing the credit of CGST (SGST in State Acts) and / or IGST paid on the said services to a supplier of taxable goods and / or services having same PAN.
Separate registration number is required for this application. An ISD is required to furnish details of invoices in form GSTR-6 through the GST portal. Every Input Service Distributor shall, after adding, correcting or deleting the details contained in FORM GSTR-6A, furnish electronically a return in FORM GSTR-6. This return will contain details of tax invoices on which credit has been received. GSTR-6 needs to be furnished by 15th of the month succeeding the tax period.
Read the full text of the Notification below.
In Shri Gyan Chand Agarwal v. ACIT, a division bench of the ITAT Jaipur held that addition of income against a power of attorney holder for the consideration received on the sale of land is not sustainable when the Department has no evidence to prove that this power of attorney was executed in lieu of a consideration.
The bench, while deleting the addition, has clarified that, the department can, however, proceed against the real owners as per the provisions of the Income Tax Act, 1961, for such income.
In the instant case, the department took a stand that the assessee, a power of attorney holder of one Shri Sultan Meena, is liable to be taxed for the sale consideration of the land belonging to the latter. Admittedly, Shri Sultan Meena is recorded owner in the land in question and , there is no evidence on record suggesting that the Power of Attorney to Shri Sultan Meena was executed by the assessee by paying consideration of the land.
However, the department suspected the transaction on ground that the assessee failed to produce Shri Sultan Meena to prove that the sale consideration so received was handed over to the said Shri Sultan Meena and also in the absence of any receipt by the owner of the land, stating that the assessee acted merely an agent.
The bench noted that the revenue has not brought out any material suggesting that the assessee received this consideration as the owner of the land.
The bench said that “the Revenue has not brought any material on record suggesting that this power of attorney was executed in lieu of a consideration. In the absence of such material, purely, on the basis of presumption and suspicion tax liability cannot be fastened on such receipt on the assessee.”
The bench further relied on the decision of the Supreme Court in the case of Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra, wherein the Court has held that a power of attorney is not an instrument of transfer in regard to any right, title or interest in any immovable property.
“The power of attorney is a creation of an agency whereby the grantor authorizes the grantee to do acts specified therein, on behalf of grantor, which when executed will be binding on the grantor as if done and by him.” It said.
Read the full text of the Order below.
The Direct Tax collections up to August, 2017 in the current Financial Year 2017-18 continue to register a steady growth.
Direct Tax collections, net of refunds, stands at Rs. 2.24 lakh crore which is 17.5% higher than the net collections for the corresponding period of the last year. This collection is 22.9% of the total Budget Estimates of Direct Taxes for the Financial Year 2017-18.
So far as the Growth Rate for Corporate Income Tax (CIT) and Personal Income Tax (PIT) in terms of Gross Revenue Collections is concerned, the Growth Rate for CIT is 5.0% while that for PIT (including STT) is 16.0%.
However, after adjusting for refunds, the net growth in CIT collections is 18.1% while that in PIT collections is 16.5%. Refunds amounting to Rs. 74,089 crore have been issued during April, 2017 to August, 2017 which are 7.2% lower than the refunds issued during the corresponding period of Financial Year 2016-17.
In DCIT v. M/s Narayani Ispat Pvt. Ltd, the Kolkata ITAT held that the interest expenses claimed by the assessee on account of delayed deposit of service tax as well as TDS liability are allowable expenses u/s 37(1) of the Income Tax Act.
Assessee, M/s Narayani Ispat Pvt. Ltd, claimed deduction in respect of interest expenses incurred by them on account of late deposit of service tax and TDS.
The department, however, rejected the claim by relying on the Apex Court ruling in the case of Bharat Commerce Industries Ltd. Vs. CIT.
In the above judgment the Hon’ble Apex Court held that as Income Tax paid by the assessee is not allowable deduction and therefore interest emanating from the delayed payment of income tax (advance tax) is also not allowable deduction.
The bench noted that the facts of the present case are distinguishable from the facts of the above case as in the case before us the interest was paid for delayed payment of service tax & TDS.
“The interest for the delay in making the payment of service tax & TDS is compensatory in nature. As such the interest on delayed payment is not in the nature of penalty in the instant case on hand. The issue of delay in the payment of service tax is directly covered by the judgment of Hon’ble Apex Court in the case of Lachmandas Mathura Vs. CIT wherein the Apex Court has ruled that the interest expense on the delayed payment of service tax is allowable deduction.”
Applying the above principles to the facts of the instant case, the bench observed that the interest expenses levied on account of delayed payment of TDS as it relates to the expenses claimed by the assessee which are subject to the TDS provisions.
“The assessee claims the specified expenses of certain amount in its profit & loss account and thereafter the assessee from the payment to the party deducts certain percentage as specified under the Act as TDS and pays to the Government Exchequer. The amount of TDS represents the amount of income tax of the party on whose behalf the payment was deducted & paid to the Government Exchequer. Thus the TDS amount does not represent the tax of the assessee but it is the tax of the party which has been paid by the assessee. Thus any delay in the payment of TDS by the assessee cannot be linked to the income tax of the assessee and consequently the principles laid down by the Hon’ble Apex Court in the case of Bharat Commerce Industries Ltd. Vs. CIT cannot be applied to the case on hand.”
Read the full text of the Order below.
A division bench of the Kolkata Appellate Tribunal, in Pioneer Himudyog P. Ltd. V. ACIT, held that payments in respect of “Donation & Subscription”, which are incidental to the business activities are allowable as expenditure under the provisions of the Income Tax Act, 1961, even in the absence of any receipt /80G certificate.
In the instant case, the Assessing Officer disallowed the claim for expenses under the head “Donation & Subscription” on ground that the same was not supported by any receipt or 80G certificate. Assesse claimed that the expenses incurred under the head “Donation & Subscription” comprised of subscription to different organizations for puja and social activities. According to them, the contribution to local religious festivals and social activities were necessary to run the business peacefully. Since the assessee company is engaged in the business of cold storage and to have good relationship with the local residents, the subscription is thus a business necessity.
The bench noticed the fact that the assessee had filed the evidence i.e. copy of ledger and evidence of donation and subscription before the AO which we note from pages 6 and 7 of the paper book. The ledger in respect to donation and subscription has been supported by evidence which is found placed from pages 8 to 28 of the paper book. Thus, we find that the assessee had in fact filed the bills of each expenditure before the AO.
Allowing the contentions of the assessee, the bench observed that “the subscription and donation was given by the assessee to various organizations to avoid confrontation and to smooth running of its business and, therefore, the expenses incurred by the assessee on subscription and donation of Rs.10,747/- is incidental to assessee’s business and are allowable as business expenditure. This view has been upheld by the Hon’ble Calcutta High Court in the case of CIT Vs. Bata India Ltd. reported in (1993) 201 ITR 884 (Cal) wherein it has been held at page 890 that contribution to local puja and festival committees or organizations to avoid confrontation and for smooth running of its business are allowable as business expenditure.”
Read the full text of the Order below.
The increased GST cess on mid- sized, luxury and SUV cars will come into effect on September 11. Earlier, the Government had approved an ordinance that empowered the GST Council, consisting of Union and state finance ministers, to increase the cess on automobiles from 15% to 25%. The government had said that the 10% approval is an “enabling provision”.
The GST Council on September 9th decided to hike cess on mid-sized cars by 2 percent, taking the effective GST rate to 45 percent.
Also, cess on large cars has been hiked by 5 per cent, taking the total GST incidence to 48 percent while that of SUVs by 7 percent to 50 percent.
The Central Board of Excise and Customs on Sunday tweeted that “Notification regarding the increase in the effective rates of the Compensation Cess on specified motor vehicles will be issued on September 11, 2017, effective from 00 hours the same day,”
After the GST Council meet on September 9, Finance Minister Arun Jaitley had said that in large vehicles where affordability of consumers is high, the cess has been increased.
“The pre-GST rate has not been restored… Even though we had a headspace of hiking cess by 10 per cent, it has been hiked by up to 7 per cent,” Jaitley had said.
Cess on small petrol and diesel cars, hybrid cars and those carrying up to 13 passengers has not been hiked.
Post rollout of GST, Car prices had dropped by up to Rs 3 lakh which were lower than the combined central and state taxes in pre-GST days. The Council raised the cess in order to fix this anomaly
Under the GST regime, cars attract the highest tax slab of 28 percent and on top of that, a cess is levied. An ordinance was promulgated last week to hike the cess from 15 percent to up to 25 per cent.
The Council has also decided on the quantum of hike in cess in various segments.
The highest pre-GST tax incidence on motor vehicles worked out to about 52-54.72 percent, to which 2.5 percent was added on account of central sales Tax, octroi and the like. Against this, post-GST, the total tax incidence came to 43 per cent. With the revision in cess quantum, now the anomalies have been removed to a greater extent.
The Supreme Court of India recently ruled that the Central Board of Direct Taxes (CBDT) has no power to amend the provisions of the law through issuing circulars.
In the instant case, the petitioners, S V Gopala Rao and Sons, challenged the validity of the CBDT circular wherein the Board amended the provisions contained in Rule 68B of the IInd Schedule to the Income Tax Act, 1961, which otherwise have statutory force.
The High Court accepted the contentions of the assesse and invalidated the circular finding the same as unconstitutional.
As per section 119 of the Income Tax Act, the Board may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board.
Upholding the High Court decision, the two-judge bench comprising of Justices A K Sikri and Ashok Bhushan ruled that “Such legislative provisions cannot be amended by CBDT in exercise of its power under Section 119 of the Act. The High Court has, therefore, rightly held the circular ultra virus and quashed the same.”
Read the full text of the Judgment below.
A division bench of the Delhi High Court, in CIT v. M/s. Indian Society Of The Church Of Jesus Christ Of Latter Day Saints, held that tax exemption to a religious/charitable trust under section 11 of the Income Tax Act cannot be denied if it is not exclusively meant for one particular religious community.
The assesse-Trust was formed with an object to disseminate useful religious knowledge in conformity with the purposes of the Church of Jesus Christ of Latter-Day Saints, to assist in promulgation of worship in the Indian Union, to establish places of worship in the Indian Union, to promote, sustain and carry out programmes and activities of the Church, which are, among others, educational, charitable, religious, social and cultural etc.
The department, for the relevant assessment year, denied income tax exemption under Section 11 of the Act to the assessee by pointing out that the Assessee-Society is a charitable society established ‘for the benefit of any particular religious community or caste’ in terms of Section 13 (1) (b) of the Act.
Though the Commissioner of Income Tax (Appeals) sustained the departments’ view, the Tribunal, while concluding the matter in favour of the assessee, noted that the programmes conducted by the Society “are open for public at large without any distinction of caste, creed or religion and the benefits of these programmes held at the meeting house are available to the general public at large. Further, the priests are not managing the affairs of the society.
Upholding the Tribunal order, the division bench noted that “It is not the percentage of expenditure on persons not belonging to the religious community that mattered. What was significant was that there were donations made by the Society for the general public utility. This showed that it was not exclusively for the benefit of one particular religious community.”
The bench further ruled that the findings of the first appellate authority was contrary to the decision of the Supreme Court in Dawoodi Bohra Jamat (supra) which held that even where the trust or society has both religious and charitable objects, “it needs to be examined whether such religious-charitable activity carried on by the trust only benefits a certain particular religious community or class or serves across the communities and for society at large”. In that case it was factually found that “the activities of the trust though both charitable and religious are not exclusively meant for a particular religious community” and, therefore Section 13 (1) (b) was not attracted.
“In the present case too, the factual finding of the ITAT is likewise. It has been found that the activities of the Assessee Society, though both religious and charitable, were not exclusively meant for one particular religious community. It was, therefore, rightly not denied exemption under Section 11 of the Act,” the bench said.
Read the full text of the Judgment below.
A division bench of the Mumbai ITAT, on Monday, allowed a claim under section 54EC of the Income Tax Act, 1961 for making investment in RECL Bonds of Rs.50,00,000/- each in 2 financial years.
Coming to the facts of the case, the assessee, an individual, has received capital gains from the sale of his tenancy rights. For that assessment year, he claimed deduction of Rs. 1 crore towards the investment in RECL Bonds under section 54EC of the Income Tax Act.
It is significant to note that the investment of Rs.50 lakhs each was made in the month of March 2013 and May, 2013 falling within the stipulated period of six months but in two different financial years.
The above claim was disallowed by the Assessing Officer by stating that the deduction under section 54 EC by making an investment cannot exceed Rs.50 lakhs in the assessment year.
The first appeal filed by the assesse was allowed by the Commissioner (Appeals). The department approached the Tribunal for relief.
Dismissing the department’s contentions, the bench ruled that there is no ambiguity in the interpretation of the s. 54EC.
“From the provisions of Sec. 54EC we noted that the limit of Rs. 50,00,000/- as given under the proviso is per person per financial year. The plain reading of the section as well as the proviso clearly suggests the same interpretation.”
Explaining the legislative intent behind the provision, the bench said that if the legislature had an intention to restrict the exemption to Rs.50,00,000/-, it would have provided the embargo in this regard.
“Restriction relates only to the investment made in any financial year by the assessee. Making of the investment is a condition for availing of the exemption. Condition for availing of the exemption requires that the investment can be made within a period of 6 months. If 6 months falls within a different financial year, as has happened in this case, in our opinion, this Tribunal cannot add the embargo that the assessee cannot make the investment to avail of the exemption under Section 54EC in the different financial year if he had already made the investment in the financial year in which the capital asset is transferred. In our opinion, the language of Section 54EC is clear and unambiguous and it leads to the interpretation that the assessee can make the investment in two different financial years provided in a financial year the investment made did not exceed Rs.50,00,000/-.”
Read the full text of the Order below.
A two-Judge bench of the Supreme Court, on Monday directed the Karnataka Government to refund the lifetime tax collected from the owners of the vehicles registered outside but plied within the State beyond 30 days.
Justice Chelameswar and Justice Abdul Nazeer, however, allowed the State Government to take an undertaking from the vehicle owners that they would have to deposit the tax again in case the state succeeds in its appeal.
The Division Bench of Karnataka High Court earlier upheld the decision of the Single Bench through which the imposition of lifetime tax on vehicles outside the State was held to be unconstitutional on ground of non-competence of State Legislature to pass such legislation.
The earlier decision was on a petition filed by the vehicles owners who registered their vehicles outside the state of Karnataka plying for more than 30 days in the state through various writ petitions. The State Legislature made an amendment to section 3 of the Karnataka Motor Vehicles Taxation Act provides for a mandatory condition to levy tax on all motor vehicles suitable for use on roads at the rates specified in part A of the Act. Part A5 of the Act pertains to the Lifetime tax payable for Motor Cars, Jeeps, Omni Buses and Private Service Vehicles and is made dependent on the registration of vehicles.
It is emphasized that section 3 of the Act and the schedule would indicate that the levy of lifetime tax is directly linked to the registration of a vehicle, and that registration is the basis of taxation. The said amendment was challenged before the High Court through various writ petitions.
In consequent to the decision of the single bench that the amendment in question is invalid, the demand raised on the petitioners was quashed. Aggrieved by the decision, the State preferred a Writ Appeal before the Division Bench of the High Court against the Single Bench’s decision.
On further appeal before the Apex Court, the bench observed that “We do not see any reason to suspend the operation of the judgment under appeal. However, we are of the opinion that the ends of justice will be met in this case by directing that the appellants would refund the amount of tax already collected, as and when a demand from the owner of the vehicle which is registered in the State is made before them and make two endorsements (i) regarding the pendency of the instant appeals and (ii) that the amount of money refunded would be a charge on the vehicle during the pendency of these appeals and would be subject to the result of these appeals. Apart from that, the appellant-State is also entitled to take appropriate undertaking from the owner of the vehicle at the time of the payment of tax in the event of State succeeds in the instant appeals.”
Read the full text of the Order below.
A division bench of the Allahabad High Court recently ruled that the benefit of Section 80IB of the Income Tax Act, 1961 is not available to assessee for the purchase of business unit including plant & machinery from a separate entity to form a separate industrial undertaking.
Assessee purchased a unit of M/s. M.C. Roller Flour Mills Limited as a whole including its plant and machinery. For the year under consideration, the assessee claimed deduction of the amount spent on the above transaction under Section 80-IB of the Act which provides for certain percentage of deductions in computing the total income of the assessee from its profits and gains.
However, the claim was rejected by the department on an impression that the transfer of the entire business unit to the assessee includes transfer of plant and machinery which was in use by the said unit or the previous owner ie. M.C. Roller Flour Mills Ltd., for establishing a new business by the assesse and therefore, in view of clause (ii) of Sub-section (2) of the benefit of Section 80-IB of the Act cannot be granted to the assessee.
The Tribunal sustained the order of the department by finding that there is transfer of plant and machinery of the unit Shri Ram Flour Mills of M/s. M.C. Roller Flour Mills Limited to the assesse company. The plant and machinery of the said unit was in use by the previous company. Therefore, the assessee company is not an industrial undertaking formed by the purchase of a new plant and machinery rather than by the transfer of previously used plant and machinery. Thus, transfer may not have amounted to splitting or reconstruction of business already in existence. Nonetheless, it amounts to constituting a new industrial undertaking by the transfer of used plant and machinery.
On appeal, the assesse contended that as the entire business of one particular unit has been taken over by the assessee, there is no reconstruction of the business already in existence and the business of the assessee is not formed by the transfer of machinery and plant previously used for any purpose, in as much as, the whole of the business was taken over and has continued as such by the assessee.
The bench accepted the contentions of the department and held that the transfer of the used plant and machinery may not result in splitting and reconstruction of the existing industrial undertaking but nevertheless when an unit as a whole is transferred, it includes the transfer of plant and machinery which was in use by the existing unit of a separate legal entity for the formation of a separate industrial undertaking. “This kind of transfer is clearly hit by clause (iii) of Sub-section (2) of Section 10 A of the Act may not be by clause (ii) of Sub-section 2 of Section 10A of the Act,” the bench said.
The bench further opined that “the purpose behind permitting the deduction under Section 80-IB of the Act is to promote setting up of a new industrial undertaking by purchasing new plant and machinery. In the event, setting up of an industrial unit by purchase of old/used plant and machinery is permitted, it would defeat the entire purpose of allowing deductions under Section 80-IB of the Income Tax Act.”
Read the full text of the Judgment below.
A bench comprising Justices S Muralidhar and Prathiba M Singh of Delhi High Court, last week held that the assessment in the name of Company dissolved by amalgamation not procedural defect but void under the provisions of the Income tax act, 1961.
Assessee, Maruti Suzuki India Ltd was amalgamated with Suzuki Powertrain India Ltd in the year 2011. As per the scheme of amalgamation, all the liabilities and duties on the entire undertaking of the Petitioner/Amalgamating Company be transferred without further act or deed to the Petitioner/ Amalgamated Company and accordingly the same shall pursuant to Section 394 (2) of the Companies Act, 1956 be transferred to and become the liabilities of the Petitioner/Amalgamated Company.
Later, the department passed an assessment order in the name and address of the amalgamating company, Suzuki Powertrain India Ltd.
Before the appellate authorities, the assesse contended that the assessment order was without jurisdiction inasmuch as it had been passed in the name of an entity that ceased to exist on the date of the assessment order.
The ITAT accepted the above plea of the MSIL and set aside the assessment order.
On departmental appeal, the bench noticed the decision in CIT v. Dimensions Apparels (P) Ltd, wherein it was held that for the purposes of Section 170 (2) of the Act, the defect of passing the assessment order in the name of an non-existent entity is not a mere irregularity . in that case, the Court observed that “The revenue seems to argue that the assessment is justified because the liabilities of the amalgamating company accrue to the amalgamated (transferee) company. While that is true, the question here is which entity must the assessment be made on. The text of Section 170(2) makes it clear that the assessment must be made on the successor (i.e., the amalgamated company).”
In view of the above decision, the division bench dismissed the appeal and held in favour of the assesse.
Read the full text of the Order below.
The Goods and Services Tax (GST) Council today clarified that the registration for Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) will be opened from 18th this month.
However, the Council has not fixed the date in which these provisions will be implemented.
“The registration for persons liable to deduct tax at source and collect tax at source (TCS) will commence from 18th September 2017. However, the date from which Tax deducted at source and TCS will be deducted or collected will be notified by the Council later.”
The Government had decided to defer the implementation of provisions relating to Tax deduction at source (TDS) and TCS considering the difficulties of the traders. Representations were made by e-commerce firms that it would be an additional compliance burden and would lock-down working capital for merchants selling online.
