PAN holder to view its Tax Credit Statement (Form 26AS) online by 3 Ways

Income Tax Department facilitates a PAN holder to view its Tax Credit Statement (Form 26AS) online. Form 26AS contains

• Details of tax deducted on behalf of the taxpayer by deductors
• Details of tax collected on behalf of the taxpayer by collectors
• Advance tax/self assessment tax/regular assessment tax, etc. deposited by the taxpayers (PAN holders)
• Details of paid refund received during the financial year

Understanding Allowability of Business Expenditure under section 37 of the Income Tax Act, 1961 with latest case laws

To Read the article click here


http://taxbymanish.blogspot.in/2011/08/understanding-allowability-of-business.html

IASB proposes clarifications on when unrealised profits are eliminated when equity accounting

The International Accounting Standards Board has published ED/2012/6 'Sale or Contribution of Assets Between and Investor and its Associate or Joint Venture (Proposed Amendments to IFRS 10 and IAS 28)'. The Exposure Draft proposes to clarify when unrealised profits and losses on transactions between an investor and an associate should be fully recognised: requiring full recognition in relation to transactions involving businesses, but requiring partial elimination in the case of asset sales.

The Exposure Draft proposes amendments to both IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011). No amendments are proposed to IAS 27 Consolidated and Separate Financial Statements and IAS 28 Investments in Associates as these

Whether valuation of closing stock at market price is permissible only in cases where business is discontinued and not where business carried on by partnership firm is taken over by a successor company without any interruption on conversion of firm into company - NO: ITAT

THE issues before the Bench are - Whether valuation of closing stock at market price is permissible only in cases where the business is discontinued and not where the business carried on by the partnership firm was taken over by a successor company without any interruption on conversion of firm into company and Whether the provision of section 40A(3) is attracted only when there is actual payment of cash from one person to another and not where transaction takes place only as part of exchange. And the answers favour the assessee.

Facts of the case

The assessee is a partnership firm, carrying on jewellery and diamond business. The partnership firm M/s.Keertilal Kalidas & Co. was converted into a private limited company on 1st January, 2008. The incorporation of the company was made

Whether when assessee lets out building with furniture and fixtures and their maintenance, composite rent received is to be treated as 'income from other sources' - YES: Delhi HC

THE issue before the Bench is - Whether when the assessee lets out building with furniture and fixtures and their maintenance, the composite rent received is to be treated as 'income from other sources'. And the answer goes against the assessee.

Facts of the case

Assessee is an individual carrying on business in the name and style of Garg Dyeing and Processing Industries. During assessment, AO perused the rental agreements and found that the rent received consisted of three components i.e. (1) rent for building, (2) rent for the furniture, fittings and fixtures and (3) charges for the maintenance of the above. Since the

UNDERSTANDING CAPITAL & REVENUE RECEIPT & EXPENDITURE WITH LATEST CASE LAWS PART- II:

 

We had earlier discuss in detail about the concepts of capital & revenue receipts & expenditures  along with various case laws earlier in part –I. In case you want to refer, the part –I, please click on the link below:

http://taxbymanish.blogspot.in/2012/01/understanding-capital-revenue-receipt.html

Over a period of time, there are number of judgements comes from various levels of courts from different locations of India and hence it is very important to know the same for the correct treatment of capital & revenue receipts & expenditures..

Holding company–subsidiary relationship : Subsidiary and its parent are totally distinct taxpayers and therefore entities subject to income tax are taxed on profits derived by them on stand alone basis, irrespective of their actual degree of  economic independence and

How to save Income Tax on Salary Income in Asstt. Year 2013-14?

Dear Tax payee and salaried employee in this month of January 2013 more confuse that how and where the invest month for saving Tax and takes tax benefit under Chapter VIA during the assessment year 2013-14. The salaried Employee and Tax payee that what are the Tax free perquisites for Salaried Employee who deducted Tax as TDS from his monthly salary, so we suggest them all Tax Free Perquisites are as follows:

Macau Taxation

macau personal Income tax

Macau (also spelled 'Macao') indivial income tax is levied at progressive rates from 7% to 12% on annual taxable income exceeding MOP 120,000.

On failure to Tax Deposit, what are Penalty, Fee, Interest and Prosecution?

If a person fails to deduct the whole or any part of the tax at source, or, after deducting, fails to pay the whole or any part of the tax to the credit of the Central Government within the prescribed time as under:

He shall be liable to action in accordance with the provisions of section 201. Section 201(1A) lays down that such person shall be liable to pay simple interest

1. at 1% for every month or part of the month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted and
2. at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid.

Whether when assessee lets out building with furniture and fixtures and their maintenance, composite rent received is to be treated as 'income from other sources' - YES: Delhi HC

THE issue before the Bench is - Whether when the assessee lets out building with furniture and fixtures and their maintenance, the composite rent received is to be treated as 'income from other sources'. And the answer goes against the assessee.

Facts of the case

Assessee is an individual carrying on business in the name and style of Garg Dyeing and Processing Industries. During assessment, AO perused the rental agreements and found that the rent received consisted of three components i.e. (1)

Whether when deduction claimed u/s 80IA was subjected to appellate proceedings and finally settled in favour of assessee, reassessment can still be initiated beyond four years - NO: Bombay HC

THE issues before the Bench are - Whether when the deduction claimed u/s 80IA was subjected to appellate proceedings and finally settled in favour of the assessee, reassessment can still be initiated beyond four years and Whether in such a case the AO's order gets merged with the Tribunal's order and any proceedings u/s 147 are barred. And the verdict goes in favour of the assessee.

Facts of the case

What are the precautions to be taken while filing PAN application/correction form?

Instructions are clearly mentioned in the Application Form itself. However, important instructions are summarized below:-

• Form to be filled legibly in BLOCK LETTERS and preferably in BLACK INK.
• Each box, wherever provided, should contain only one character (alphabet /number / punctuation sign) leaving a blank box after each word.
• 'Individual' applicants should affix two recent colour photographs with white background (size 3.5 cm

Exemptions from Salary Income u/s. 10 of the Income Tax Act.

Section 10 of the I.T.Act provides for certain categories of payments to be exempt from taxation, either wholly or partly.  Such payments are not to be included under the head ‘salary’ for computing the tax deductible. Some of these are listed below and are discussed in detail in Chapter-5 of this booklet.

Death cum retirement gratuity or any other gratuity: Exempt to the extent specified u/s 10(10).
Commutation of pension:  Exempt to the extent as provided in Sec 10(10A)
Leave encashment:  Exempt to the extent provided in Sec 10(AA).
Retrenchment Compensation:  Exempt to the extent provided by Section 10(10B).
Compensation on voluntary retirement:  Exempt to the extent provided by Sec 10(10C)
Payment from provident fund:  Exempt to the extent provided in Sec. 10(11) & Sec 10(12).
Payment from approved superannuation fund:  Exempt under Section 10(13).
Interest income & investments:  As provided u/s 10(15).
Exemption of pension/family pension to awardees of PVC, MVC and VC: Clause (18) of section 10 provides for exemption of any income by way of pension received by an individual or family pension received by any member of the family of an individual who has been in the service of the Central Government or State Government and has been awarded “Param Vir Chakra” or “Maha Vir Chakra” or “Vir Chakra” or such other gallantry award as may be specifically notified by the Central Government

Whether when a part of residential property owned by company is occupied by Director and rest by shareholders, such rental income is to be treated as business income in first case and rental income in second - YES: ITAT

THE issues before the Bench are - Whether when a part of the residential property owned by the company is occupied by the Directors of the company and the rest by the shareholders, such rental income is to be treated as business income in the first case and rental income in the second; Whether when the rent is given at a lower rate to the shareholder of the company, the AO is justified to consider the market value as the rental income and Whether when the main business of the assessee is not lending in an organized manner and assessee has not filed any appeal in the preceding year treating the

Whether when deduction claimed u/s 80IA was subjected to appellate proceedings and finally settled in favour of assessee, reassessment can still be initiated beyond four years - NO: Bombay HC

THE issues before the Bench are - Whether when the deduction claimed u/s 80IA was subjected to appellate proceedings and finally settled in favour of the assessee, reassessment can still be initiated beyond four years and Whether in such a case the AO's order gets merged with the Tribunal's order and any proceedings u/s 147 are barred. And the verdict goes in favour of the assessee.

Facts of the case

Assessee is engaged in the business of generation and distribution of electricity. Originally the assessee was engaged only in the distribution of electricity in Mumbai. However, with effect from assessment year 1996-97 it commenced generation of electricity from its plant at Dahanu. As a consequence of establishing of plant for generation of electricity

UNDERSTANDING DEEMED DIVIDEND WITH LATEST CASE LAWS PART- II:

We had earlier discuss in detail about the concepts of deemed dividend along with various case laws earlier in part –I. In case you want to refer, the part –I, please click on the link below:

http://taxbymanish.blogspot.in/2011/09/understanding-deemed-dividend-with.html

Over a period of time, there are number of judgements comes from various levels of courts from different locations of India and hence it is very important to know the same for the correct treatment of deemed dividend.

• In the case of ITO v. Direct Information P. Ltd, 18 ITR 562 (Mum.)(Trib.), The Hon,ble Mumbai ITAT held that when no material placed on record by the department to show that the entries recorded in the books of accounts are false, untrue and without any basis, section 2(22)(e) was not applicable .

• In the case of ITL Fabrics P. Ltd. v. Assistant CIT (Mumbai), Vol 19 Pg 499, it had been decided that where property let to group concerns in preceding year against deposit and no additional letting in year in question, then no deposit taken and sum received from group concerns for setting up new project. Is not deposit but loan and no material to show money-lending was business of creditor company. Loan not given in course of its business. Sum received is deemed dividend and Taxable only to extent of accumulated profits on last day of preceding year.

• Chennai ITAT in the case of Farida Holding P. Ltd v. Dy. CIT, 51 SOT 452, held that Assessee company, a holding company of 11 subsidiary companies. The assessee company managed the financial affairs of its subsidiary companies in its ordinary course of its business. The assessee as a part of its role arranged short term and long term funds for its subsidiaries. Thus, it was held that the activity to taking loan from the subsidiaries and advancing it to other subsidiaries in ordinary course of its business cannot be treated as deemed dividend.

• Delhi High Court in the case of CIT v. Bharati Overseas Trading Co, 249 CTR 554, held that The Assessing Officer has held that loan received by partnership firm from Bharti Enterprises (P) Ltd should be treated as deemed dividend as two partners hold more than 10 percentage shares in Bharti Enterprises (P) Ltd . CIT (A) and Tribunal decided the issue in favour of assessee. On appeal, the High Court following the Judgment in National Travel services (2012) 249 CTR 540 (Delhi ) held the issue in favour of revenue holding that partnership firm is to be treated as the share holder and it is not necessary that it has to be “registered shareholder”. The question was answered in favour of revenue. As regards the accumulated profits the matter is set aside to the Tribunal by giving a reasonable opportunity to both the parties.  

• In the case of CIT v. Gopal Clothing Co. Ltd., 71 DTR 358, it was held that S. 2(22)(e) cannot be invoked in respect of the unsecured loans taken by the assessee from the other company if the assessee does not possess the prescribed voting rights in that company; shareholding of the common shareholder or director cannot be taken into consideration for the purpose.

• In case when amount advance by one company to another who is not a shareholder, but have common director is not a case of deemed divided.   Refer, CIT v. MCC Marketing Pvt. Ltd, 343 ITR 350.  Similar decision was also given in the case of CIT v. Ankitech P. Ltd, 340 ITR 14

• Journal entries could not be said to be credit entries hence can be assessed as deemed dividend. Refer, Asst.CIT v. Gurbinder Singh, 50 SOT 263.

• The assessee has availed interest free loans from two companies. Assessing Officer taxed the alleged interest as deemed benefit under section 2 (24)(iv) of the Act, which was confirmed by the Commissioner (Appeals). Tribunal deleted the addition. On appeal by revenue the court held that the interest on interest free loans availed by assessee from two companies in which she was a director could not be treated as her deemed income in terms of section 2 (24)(iv) of the Act.  Refer, CIT v. Madhu Gupta, 205 Taxman 303. 

• Assessee has filed the confirmation and copies of accounts showing that the amountsrepresenting in the accounts were receipts due to the appellant, in the normal course of business dealings with these companies. The Court held that receipts from these companies cannot be treated as deemed dividend.  Refer, CIT v. Francies Waczirag, 66 DTR 453

• In the case of CIT v. Navyug Promoters (P) Ltd, 203 Taxmann 618, it  was held that, Assessee company took certain loan from two companies. Assessing Officer was of view that said loan was to be added to assessee’s income as deemed dividend under section 2(22)(e). The Court held that an assessee who is not a share holder of company, from which he received a loan or advance, cannot be treated as being covered by definition of word ‘dividend’ as provided in section 2(22)(e).

• Assessee company not being a shareholder in the company HEBPL, unsecured loan received by the assessee from that company can not be taxed as deemed dividend under section 2(22)(e) in the hands of the assessee company because a common share holder being more than 20 percent shares in both companies. Refer, ACIT v. Bombay Real Estate Development Company (P) Ltd., 64 DTR 137.

• Assessee company leased out its property to ‘M’ Ltd. for 22 years against an advance of Rs. 320 crores to be adjusted against rent payable by the lessee. A dispute arose between the assessee and M Ltd. and for amicable settlement, a new agreement was entered into between them agreeing thereby, that “M Ltd.” would pay security deposit of Rs. 3.80 crores to the assessee to be refunded at the end of lease period and after handing over the possession of the property to the assessee. Assessing Officer treated the security deposit as deemed dividend under section 2(22)(e) on the basis that two of the beneficial shareholders of the lease company i.e. M Ltd were also shareholders and had substantial interest in the assessee company. The assessee submitted that it neither held any share in” M Ltd. nor had any beneficial interest in the said company and that deemed dividend in terms of section 2(22)(e) can be assessed only in hands of a person who is a shareholder of the lender-company and not in the hands of a person other than a shareholder. The Tribunal accepted the contention of assessee and held that deemed dividend can be assessed only in the hands of a person who is a shareholder of lender company and not in hands of a person other than a share holder. Expression “share holder being person who is beneficial owner of shares” referred in first limb of section 2(22)(e), refers to both a registered share holder and beneficial share holder. If a person is a registered share holder but not beneficial then provision of section 2(22)(e) will not apply, similarly, if a person is a beneficial share holder but not registered shareholder then also provision of section 2(22)(e) will not apply. Accordingly the order of Commissioner (Appeals) who has deleted the addition was confirmed. Refer, Dy. CIT v. Madusudan Investment & Trading Co. Ltd., 48 SOT 360. 

• Amount received from a company having been misappropriated by shareholder, there was no loan or advance, even assuming to be dividend it would have to be taxed in the hands of shareholder and not in the hands of assessee. Refer, CIT vs. Universal Medicare (P) Ltd, 37 DTR 409.

• Receipts which are in the ordinary course of business cannot be treated as deemed dividend. Refer, ACIT vs. Sunil Chopra, 2 ITR 469 (Trib.)(Delhi).

• Calcutta High Court in the case of Pradip Kumar Malhotra v CIT, held that Advance given by company to assessee shareholder by way of compensation for keeping his property as mortgage on behalf of company to reap benefit of loan could not be treated as deemed dividend within the meaning of section 2(22)(e). Phrase ‘ by way of advance or loan’ appearing in section 2(22)(e) must be construed to mean those advances or loans which a shareholder enjoys for simply on account of being a person who is beneficial owner of shareholding not less than 10 percent of voting power , but if such loan or advance is given to such share holder as a consequence of any further consideration which is beneficial to company received from such a share holder , such advances or loan cannot be treated to be deemed dividend with in the meaning of section 2(22)(e). (A.Y 1999-2000)
   

• Delhi High Court in the case of CIT vs. Arvind Kumar Jain held that the assessee held 50% of the shares of a closely held company. The assessee’s books showed that he had taken an “unsecured loan” of Rs. 47 lakhs from the company. The AO assessed the said amount as “deemed dividend” u/s 2(22)(e) though the CIT (A) & Tribunal deleted it on the ground that there was a running business relationship between the assessee and the company and the said amount was not a loan but was the result of those business transactions. The department filed an appeal before the High Court. HELD dismissing the appeal: 

• In the case of CIT v National travel Service, Delhi High Court held that It was held that for s. 2(22)(e), a firm has to be treated as the “shareholder” even though it is not the “registered shareholder”. The first limb of s. 2(22)(e) is attracted if the payment is made by a company by way of advance or loan “to a shareholder, being a person who is the beneficial owner of shares”. While it is correct that the person to whom the payment is made should not only be a registered shareholder but a beneficial share holder, the argument that a firm cannot be treated as a “shareholder” only because the shares are held in the names of its partners is not acceptable. If this contention is accepted, in no case a partnership firm can come within the mischief of s. 2 (22)(e) because the shares would always be held in the names of the partners and never in the name of the firm. This would frustrate the object of s. 2(22)(e) and lead to absurd results.

• Circuitous transaction where money initially belonged to assessee returned to company on very same day does not attract section 2(22)(e). Refer, Pravin Bhimshi Chheda Shivsadan v. Deputy CIT, Part 11 Pg 705.

• The assessee was a partnership firm consisting of three partners being Naresh Goyal, Surinder Goyal and Jet Enterprises Pvt. Ltd. The assessee was the “beneficial owner” of 48.18% of the share capital of Jetair Pvt. Ltd which were held in the name of its partners Naresh Goyal and Surinder Goyal. The assessee took a loan of Rs. 28.52 crores from Jetair Pvt. Ltd. The AO held that the said loan was assessable as “deemed dividend” u/s 2(22)(e) in the hands of the assessee which was reversed by the Tribunal. Before the High Court, the assessee argued, relying on Ankitech Pvt. Ltd, Universal Medicare 324 ITR 363 (Bom) and Bhaumik Colour 118 ITD 1 (Mum) (SB), that s. 2(22) could only apply in the hands of the “shareholder” and as the assessee was not a “shareholder” (its partners were), s. 2(22)(e) could not apply. HELD rejecting the assessee’s plea. Refer, CIT vs. M/s National Travel Services (Delhi High Court).

In case you have any further clarification, feel free to contact me at taxbymanish@yahoo.com or else you can view more articles & news related to Indian tax & finance at http://taxbymanish.blogspot.in/.

Thank you

Computation of Income from Self Occupied Property

As mentioned earlier, where a person has occupied more than one house for residential purposes, only one house, as chosen by him will be treated as ‘self occupied’ and all other houses will be deemed to be let out and the income from such houses would be computed as indicated earlier. In regard to one house treated as used for own residential purposes throughout the year, Section 23 (2) (a) prescribes that annual value of such house shall be taken to be nil, if the conditions mentioned below are satisfied:

a.       the property (or part thereof) is not actually let during whole (or any part) of the previous year; and

b.      no other benefit is derived therefrom

Interest on borrowed capital for self occupied property

The maximum amount of interest permissible in cases of self-occupied property is

TAN Account now migrating from TIN to TRACES (TDS-CPC)

TRACES is a web-based application of the Income Tax Department that provides an interface to all stakeholders associated with TDS administration. It enables viewing of challan status, downloading of NSDL Conso File, Justification Report and Form 16 / 16A as well as viewing of annual tax credit statements (Form 26AS).

The portal is intended for use by the following types of users:

• Deductors / Collectors
• Tax Payers

Deductors / Collectors and Tax Payers will have to register on TRACES to create their account and view functionalities enabled for each user. Deductors / collectors will be able to view the status of challans. TRACES also enables deductors / collectors to view TDS / TCS credit and verify PAN of Tax Payers linked to the deductor / collector.

Tax Payers will be able to view the annual tax credit for their PAN for the TDS / TCS amount deducted by deductors (Form 26AS). Tax Payers can also view if deductor has filed statement for a particular FY and Quarter and whether their PAN is included in the statement filed by deductor.
Users will be able to login to TRACES after successful registration.

The portal aims to improve the overall service levels for deductors and tax payers by providing an interface with a range of online services accessible by users anytime, anywhere.

Click here for the detailed procedure for registration and login.

Avoid your TDS by submitting form 15G and 15H

To Read the article click here

http://taxbymanish.blogspot.in/2011/09/avoid-your-tds-by-submitting-form-15g.html

Rate of Exchange effective from 07/12/2012 for Service Tax

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, PART-II, SECTION 3, SUB-SECTION (ii), EXTRAORDINARY]

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

CENTRAL BOARD OF EXCISE AND CUSTOMS

NOTIFICATION

                                                                                              NO.108/2012-CUSTOMS (N.T.)

DATED THE 6^th December, 2012

15 Agrahayana, 1934(SAKA)

S.O.       (E). – In exercise of the powers conferred by section 14 of the Customs Act, 1962 (52 of 1962), and in super session of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.99/2012-CUSTOMS (N.T.), dated the 16^th November,