Seized material must have some nexus to additions sought to be made by AO and must be relevant for forming belief regarding escaped income: HC

THE ISSUE BEFORE THE COURT IS - Whether the seized material must have some nexus or relevance to the additions sought to be made and must be relevant for the belief formed regarding income having escaped assessment. YES is the verdict.  

Mandatory return-filing before due-date to claim tax-holiday not 'discriminatory'; Upholds Constitutional validity

Delhi HC dismisses assessee’s (100% EOU) writ for AY 2007-08, upholds constitutional validity of Sec. 80A(5) as well as fourth proviso to Sec. 10B(1) (the sections mandate filing of return of income within prescribed due-date u/s 139(1) in order to claim tax holiday u/s. 10A/10B); Assessee submitted that the provisions discriminate between two sets of assessees – one, who file return u/s. 139(1) but claim the deduction subsequently by way of revised return u/s. 139(5), and another set of taxpayers, who could not file return within due date but claim the deduction in the original return filed belatedly u/s. 139(4) and therefore violative of Article 14 of the Constitution; HC observes that the provisions did not curtail any vested rights of taxpayer but it only imposed an obligation to claim deductions in a timely manner and in the return so filed; HC also refers to SC ruling in Nallamilli Ramli Reddi to hold that Article 14 permits reasonable classification if it is based on intelligible differentia and it has reasonable connection with the object sought to be achieved; Noting that the objective behind insertion of the two provisions was to defeat multiple claims of deductions and to ensure better tax compliance, HC rules that “it is open to legislate and prescribe different conditions in respect of those who claim benefits, just as the substantive provisions which stipulate the conditions (kind of accounts to be maintained, eligibility criteria, etc.).”; Also relies on SC rulings in Kedarnath Jute Manufacturing Co. Ltd. and Sanjay Kumar Jain to uphold the validity of fourth proviso, being merely a qualifying proviso, which seeks to limit the general provision in Sec. 10B(1) with a further stipulation or condition:HC 

Few Points on ICDS

(a)  ICDS will decide the turnover  required to be computed for Presumptive taxation

(b)  The CBDT issued a FAQ on March 23, 2017 and details of same available  at following link.

  https://taxofindia.wordpress.com/2017/04/05/update-on-icds/

(c)  ICDS applicable only to Income from business/profession and Income from other sources

(d)  The concept of prudence is no more applicable and hence no expected loss being applicable

(e)  Unlike accounting standard which uses word “shall’, the ICDS uses the word “should” only.

(f)   For 9 ICDS, there are transitional provisions.

(g)  In case there is no Tax audit, then the disclosure of ICDS required to  be made at computation.

(h)  For computation of service work in progress, there are  following  method

Ø  Physical measurement

Ø  Estimated Cost

(i)    Act & rules both  will prevail over ICDS but the supreme court judgement are debatable.

(j)    For construction contract, the transitional provision is that  for existing old pprojects, they can continue with their old method till their completion.

(k)  Provide for interest income in case the customer contract mention the same and in case same is debatable, then  provide for bad debt u/s 36(1)(vi).

(l)    Capitalise all interest expenses even the duration of creation  of asset is less than 12 months.

(m) Provision of expenses must be reasonable

(n)  Recognition of contingent asset.

(o)  Section 115A -  Tax on special case -  ICDS applicable

(p)  Any change is accounting policy is retrospective and any change in accounting estimate is prospective.

(q)  ICDS not applicable to assesse who follow cash system. Also  not applicable to Individual/ HUF who not subject to tax audit.

(r)   No completed contracted method  (CCM) now exist, only PCM ( Percentage Completion Method).