CBDT Circular On Extension Of Due Date For Filing Refund Claims

The CBDT has issued Circuar 04/2014 dated 10.02.2014 pointing out that a large number of returns have become non-est as ITR-V was not furnished within the due date. As a result the refund claims have not been processed. In order to mitigate the hardships of taxpayers pertaining to non-receipt of tax refunds, the CBDT has extended u/s 119(2)(a) the date for filing ITR-V for AYs 2009-10, 2010-11 and 2011-12 to 31.03.2014. The time-frame under the second proviso to s. 143(1) for issuing the Intimation has been extended to 6 months from the end of the month in which ITR-V is received. 

Interest u/s 244A is not taxable in the year of grant of refund but has to be spread over the respective AYs to which it relates

M. Jaffer Saheb (Decd.) vs. CIT (Andhra Pradesh High Court)

In AY 1982-1983 the AO raised a demand which the assessee paid. In AY 1990-91 (16.06.1989) the AO gave effect to the Tribunal’s order and refunded the tax paid by the assessee together with interest for the period from 30.10.1985 to 31.08.1989. The AO held that the said interest was assessable to tax in AY 1990-1991 while the assessee claimed that the said interest had to be spread over and assessed in AYs 1985-1986 to 1988-1989. The CIT(A) upheld the claim of the assessee though the Tribunal upheld the stand of the AO. On appeal by the assessee to the High Court HELD allowing the appeal:

S. 263: CIT cannot revise the TPO’s transfer pricing order passed u/s 92CA(3). CIT also cannot revise s. 143(3) order because such order is not erroneous if it follows binding order of TPO

Tata Communications Limited vs. DCIT (ITAT Mumbai)

The AO made a reference u/s 92CA(1) to the TPO for the computation of arm’s length price (“ALP”) in relation to the international transactions in AY 2005-06 & 2006-07. Pursuant thereto, the TPO passed an order u/s 92CA(3) proposing an adjustment of Rs. 12.19 crore for AY 2005–06 & Rs. 9.18 crore for AY 2006–07. The AO computed the income of the assessee in conformity with the ALP determined by the TPO. Thereafter, the CIT passed an order u/s 263 by

Delhi HC rules that outsourcing of services by a US company to its Indian affiliate does not constitute a PE

This Tax Alert summarizes a recent decision of the Delhi High court (HC) in the case of E Funds Corporation and its group entities on whether outsourcing of services to an Indian affiliate results in a Permanent Establishment (PE) in India for the Foreign Enterprise (FE) under the provisions of the India-US Double Taxation Avoidance Agreement (DTAA). The HC held that a subsidiary constitutes an independent legal entity for taxation purpose and, hence, the holding-subsidiary relationship or control exercised by a parent on its subsidiary, by itself, does not result in a PE of the FE in India unless the contrary is proved.

On facts, the outsourcing of activities to the Indian affiliate was found not to result in either a fixed place or agency PE of the FE in India. Deputation of employees of the FE to carry out stewardship activities to protect the interests of the FE does not result in a

Procedure of Income Tax Refund

How to get that Delays in income tax refunds, even after the stipulated number of months, are faced by many tax payers. Running from pillar to post at the income tax office, having to deal with impolite income tax officials become a part of the ordeal. At such times tax payers often feel helpless with absolutely no recourse. To address such issues, the government has set up the Tax Ombudsman in select cities, to address grievances and to provide tax payers a platform to put forth his issues and problems.

S. 41(1): Unclaimed liabilities (of earlier years), which are shown as payable in the accounts, are not taxable as income even if creditors untraceable & liabilities are non-genuine

CIT vs. Bhogilal Ramjibhai Atara (Gujarat High Court)

In AY 2007-08 the assessee showed an amount of Rs. 37.52 lakhs as being due to various creditors. The AO issued summons to the creditors. Some of the creditors were not found at the given address and some stated that they had no concern with the assessee. The AO took the view that there was a “cessation” of the liabilities and assessed the said liabilities to tax u/s 41(1).

Whether when agreement which assessee entered into gets terminated, all expenses relating to such agreement is allowable as revenue expenditure - YES: ITAT

THE issue before the Bench is - Whether when agreement which assessee entered into gets terminated, all expenses relating to such agreement is allowable as revenue expenditure. And the answer is YES.

Facts of the case

The assessee is engaged in the business of Realtor and Contractor. It used to enter into

Form 27A generated by TDS-TCS FVU mandatory from Feb 1, 2014.

As you may be aware, the e-TDS/TCS File Validation Utility (FVU) version 4.1 and 2.137 which has been released on January 3, 2014 has the feature of generating pre-filled Form 27A. The deductor/collector need not prepare a Form 27A separately as all the requisite information of the e-TDS/TCS statement gets printed in the Form 27A generated by e-TDS/TCS FVU.

With effect from February 1, 2014, deductors/collectors will mandatorily be required to submit Form 27A generated by e-TDS/TCS FVU duly signed along the e-TDS/TCS statement. Form 27A submitted in any other format will be treated as invalid submission and the same will be rejected by TIN-FC branches.

You are therefore requested to suitably advise your staff who looks after preparation and submission of e-TDS/TCS returns.

Please let us know in case of any concerns or clarifications. Do not reply to this email ID. For clarification on the above you may send e-mail to tin_returns@nsdl.co.in or contact TIN call center at 020 - 2721 8080.

For and on behalf of

Tax Information Network of Income Tax Department

Tax clearance necessary for restructuring/ M&A schemes

 

The Ministry of Corporate Affairs (“MCA”) vide circular dated January 15, 2014^[1] (“Circular”) has mandated all Regional Directors to seek inputs/ comments in all cases of arrangement/ compromise or reconstruction/ amalgamation undertaken in accordance with Section 391-394 of the Companies Act, 1956 (“1956 Act”) from Income Tax Department and other sectoral regulators.  We have, in this alert, summarized the key changes introduced by MCA vide the Circular and the related impact. 

S. 220: AO’s action of coercive recovery is illegal and shocks the conscience. The Tribunal cannot remain a silent spectator to such illegal action

DIT vs. Maharashtra Housing & Area Development Authority (Bombay High Court)

The assessee received the order of the CIT(A) on 16.11.2013. It filed an appeal before the Tribunal on 18.11.2013 which was the next working day. The assessee also filed an application before the Tribunal requesting stay of demand. The said application was fixed for hearing on 22.11.2013. However, the AO, without awaiting the outcome of the stay application, attached the assessee’s bank account u/s 226(3) on

The investment limit in Government securities is increased for certain types of FIIs from US$ 5 billion to US$ 10 billion

The Government of India, in consultation with the Reserve Bank of India (‘RBI’) and the Securities and Exchange Board of India (‘SEBI’), has raised the investment limit in Government debt available to long-term investors registered with SEBI as FIIs under the categories of: (i) Sovereign Wealth Funds (‘SWFs’), (ii) Multilateral Agencies, (iii) Endowment Funds, (iv) Insurance Funds, (v) Pensions Funds, and (vi) Foreign Central Banks, from the current limit of US$ 5 billion to US$ 10 billion

Form 27A generated by TDS-TCS FVU mandatory from Feb 1, 2014.

As you may be aware, the e-TDS/TCS File Validation Utility (FVU) version 4.1 and 2.137 which has been released on January 3, 2014 has the feature of generating pre-filled Form 27A. The deductor/collector need not prepare a Form 27A separately as all the requisite information of the e-TDS/TCS statement gets printed in the Form 27A generated by e-TDS/TCS FVU.

Supreme Court upholds initiation of prosecution for failure to file return (Sasi Enterprises)

Supreme Court of India (SC) in the case of Sasi Enterprises (Taxpayer) v. ACIT where the SC held that prosecution can be initiated against a taxpayer who fails to furnish return of income (ROI) within the statutory due date or in response to a notice issued by Tax Authority. The SC also reiterated that, in the prosecution proceedings for failure to file ROI on time, the initial burden lies on the taxpayer to prove the circumstances which prevented the taxpayer from filing ROI on time and it is not for Tax Authority to prove that taxpayer had wilfully committed the default. Further, the fact that taxpayer’s assessment has not become final due to pendency of appeal proceedings would not act as bar against initiating prosecution proceedings.

S. 14A disallowance has to be applied while computing book profits under clause (f) of Explanation to s. 115JA

CIT vs. Goetze (India) Ltd (Delhi High Court)

In AY 2000-01 the assessee offered income on the basis of book profits u/s 115JA. The assessee had credited the P&L A/c with dividend income of Rs. 1.57 crore. It claimed that the said dividend had to be excluded while computing the book profits, which was accepted by the AO. The CIT thereafter passed an order u/s 263 in which she claimed that the expenditure incurred to earn the said dividend had to be disallowed under clause (f) of the Explanation to section 115JA while computing the book profits. She

S. 14A & Rule 8D: If AO does not deal with assessee’s arguments, it means that he has not reached objective satisfaction that assessee’s method is incorrect & cannot invoke Rule 8D

Kalyani Steels Ltd vs. ACIT (ITAT Pune)

In AY 2008-08 the assessee earned dividends of Rs. 5.45 crore and offered a disallowance u/s 14A of Rs. 5 lakhs. It gave a detailed explanation on why the amount of disallowance was adequate. However, the AO refused to accept the explanation and made a disallowance under Rule 8D of Rs. 1.05 crore. This was upheld by the CIT(A). On appeal by the assessee to the Tribunal HELD allowing the appeal: (i) The invoking of Rule 8D to compute the disallowance u/s 14A is neither automatic and nor is triggered

India Taxes- Due Date Alert for the month February 2014

 

No	Due Date	Related to	Compliance to be made
1	05.2.2014	Service Tax	Payment of Service Tax for the Month of January 2014
2	07.2.2014	TDS/TCS (Income Tax)	·        Deposit TDS for payments of Salary, Interest, Commission or Brokerage, Rent, Professional fee, payment to Contractors, etc. during the month of January 2014. ·        Deposit TDS from Salaries  deducted during the month of January 2014 •   Deposit TCS for collections made under section 206C including sale of scrap during the month of January 2014, if any •    Deliver a copy of Form 15G/15H, if any to CCIT or CIT for declarations received in the month of January 2014, if any
3	20.2.2014	VAT	Payment of VAT & filing of monthly return for the month of January 2014

willful failure to file return - offence under Section 276CC - Pendency of appellate proceedings is not factor for not initiating prosecution: SC

THE assesse appellants are J. Jayalaithaa, N. Sasikala and their partnership firm Sasikala Enterprises, who have all been prosecuted under Section 276CC of the Income Tax Act for failure to file Income Tax returns. The accused appellants had filed discharge petitions with the trial court which was rejected. On appeal, the High Court also rejected the plea. The accused appellants are before the Supreme Court, actually in the second round of litigation.

Appellants' plea: The senior counsel appearing for the appellants, submitted that the High Court

Whether loss claimed is to be allowed even if assessee fails to produce documents on pretext that same were seized by Central Excise Department - NO: ITAT

THE issue before the Bench is - Whether loss claimed by the assessee can be allowed, when its documents were seized by the Central Excise department and could not be produced even though the assessee was provided a reasonable time period. And the answer goes against the assessee.

Carbon Credit receipts are not chargeable to tax as “income”. For s. 80-IA(8) if there are multiple “market values” assessee has the right to choose

(i) Carbon credit is in the nature of ‘an entitlement’ received to improve world atmosphere and environment reducing carbon, heat and gas emissions. The entitlement earned for carbon credits is a capital receipt and cannot be taxed as a revenue receipt. It is not generated or created due to carrying on business but it is accrued due to ‘world concern’. It has been made available assuming character of transferable right or entitlement only due to world concern. The source of carbon credit is world concern and environment. Due to that the assessee gets a privilege in the nature of transfer of carbon credits. Thus, the amount received for carbon credits has no element of profit or gain and it cannot be subjected to tax in any manner under any head of income. My Home Power Ltd 151 TTJ 616 (Hyd), Velayudhaswamy Spinning Mills 40 taxmann.com 141 (Chennai) & Ambika Cotton Mills Ltd (Chennai) followed. Also, in Vodafone International Holdings 341 ITR 1 the Supreme Court has held that treatment of any particular item in different manner in the 1961 Act and Direct Tax Code (“DTC”) serves as an important guide in determining the taxability of said item. Since DTC specifically provides for taxability of carbon credit as business receipt and Income Tax Act does not do so, it means that carbon credits are not taxable under the Act

For s. 14A/ Rule 8D(2)(ii), interest expenditure on loans taken for taxable business purposes has to be excluded

ITO vs. Narain Prasad Dalmia (ITAT Kolkata)

Rule 8D(2)(ii) is very clear that the expenditure on account of payment of interest would be covered in the said Rule only if it is not directly attributable to any particular income or receipt. If the assessee is able to demonstrate that the payment of interest is directly attributable to the assessee’s business, it cannot be considered under Rule 8D(2)(íi) of the I.T. Rules and has to be excluded while computing the disallowance u/s 14A