Tax analysis of Transfer of Capital Asset from Partnership Firm to Partners

 

 

1. Background

• Section 45(4) of the Income Tax Act, 1961 (hereinafter referred to as the Act) deals with computation of income from capital gains arising by way of distribution of capital assets on dissolution or otherwise of firm/AOP/BOI (other than company and co-operative society).Prior to the introduction of this Section, it was a settled legal position that, assets of the firm belonged to the partners. And therefore no gain shall arise on account of transfer of such assets to the partners upon dissolution or reconstitution. With a view to curb such tax avoidance through routing of assets from firm to partners, the Finance Act, 1987 inserted a new sub-section 4 of Section 45 of the Act.

CBIC clarifies applicability of Notification relating to interest provision under GST

 

 

This Tax Alert summarizes a Press Release dated 26 August 2020 issued by the Central Board of Indirect Taxes and Customs (CBIC).  

 

Notification no. 63/2020–Central Tax dated 25 August 2020 was issued to provide that section 100 of the Finance (No. 2) Act, 2019 shall come into force w.e.f. 1 September 2020¹.

  

Notification thus made the proviso inserted in section 50(1) of the Central Goods and Services Tax Act, 2017, effective prospectively from 1 September 2020. As per the said proviso, in case of delayed filing of return, interest shall be levied only on net tax liability paid in cash, after adjusting input tax credit available with the taxpayer.

 

The GST Council, in its 39th meeting held on 14 March 2020, had decided that proviso will be given retrospective effect from 1 July 2017².

 

Through the press release, CBIC has clarified that the Notification dated 25 August 2020 gave effect to the proviso prospectively due to certain technical limitations and have assured that Revenue will not make recoveries for the past period in accordance with the decision of GST Council.

  

The press release is likely to provide much needed relief to taxpayers who delayed return filing and had paid interest on net tax liability after adjusting input tax credit.

TAX AUDIT APPLICABILITY from AY 2020-21:

 

 

In Budget 2020, Govt introduces one more slab of turnover of INR 5 Cr for the person, whose CASH RECEIPTS & CASH PAYMENTS does not exceeds 5% of such payments, and straightway exempted such category from Tax Audit.

Impact of ‘relevant facts’

 

Impact of ‘relevant facts’ is often disregarded in interpretation of statute and when it happens, we are left with nothing but spiral jargon of words, with little or no certainty. This phenomenon has become a trivial truth and examples of it can be found across legislations, jurisdictions or even time frames.

Disputes of the Dispute system – SVLDRS under radar?

 

The  scheme  launched  by  the  Central  Government  in  Union  Budget 2019  –  Sabka  Vishwas  (Legacy  Dispute  Resolution  Scheme)  2019  or SVLDRS was much touted for closing out the Service tax and Central Excise disputes. The scheme was introduced to conclude all disputes of the  erstwhile  regime  which  are  now  subsumed  under  GST.  Though there are 28 indirect tax enactments which are covered under the said scheme,  Central  Excise  and  Service  Tax  are  the  prominent  ones.  This scheme  aims  at  providing  a  fresh  start  to  the  taxpayers  by  cleaning their slate of the erstwhile regime. The said scheme came into effect on 1  September  2019  and  covered  cases  of  Show  Cause  Notice  (SCN), appeals arising out of a SCN pending as on 30 June 2019; amount in arrears;   an   enquiry,   investigation,   or   audit   where   the   amount   is quantified  on  or  before  30  June  2019;  and  a  voluntary  disclosure. Amongst  other  things,  the  scheme  waives  off  any  interest,  penalty, fines  and  provides  partial  duty  relief  and  amnesty  from  prosecution proceedings.

ITAT’s Recent Ruling on Re-characterisation of 'Capital Reserve' From Amalgamation – The Issues Untouched…

 

Recently, Delhi ITAT in the case of Hespera Realty Pvt. Ltd . [ITA No. 764/Del/2020] / have turned down AO’s attempt to recharacterize an amount transferred to capital reserve during AY 2015-16 pursuant to accounting treatment specified under scheme of amalgamation duly approved by the High Court. AO termed the entire transaction as colorable device and recharacterized the amount of Rs. 247 crores transferred to capital reserve as revaluation reserve to treat it as adjustment to book profit as per clause (j) to Explanation 1 u/s 115JB and levied the MAT on the same. ITAT has held in favour of taxpayer.

An Analysis of India GST Law After Three Years.

 

Background.

The significant Goods and Services Tax law (GST) was brought into place and effectuated on 1st July 2017 after adoption on 8th August 2016 of the 101st Constitutional Amendment Act, 2016. Last month marked the 3rd anniversary of the law, introduced in a midnight session addressed by Hon’ble President Pranab Mukherjee, Prime Minister Narendra Modi and Finance Minister Arun Jaitley in the Central Hall of Parliament on 30^th June 2017 where the game-changing economic reform was formally announced. 

 

TP Challenges During COVID-19.

 

 

The expected spike in the number of multinationals reporting losses in the wake of the COVID-19 pandemic may seriously disrupt an international transfer pricing regime that was designed primarily for the allocation of profit.

Understanding CBDT MAP Guidance.

 

Introduction

The Organisation for Economic Co-operation and Development (OECD) in its Base Erosion and Profit Shifting (BEPS) project, had, under the Action Plan 14 (Making Dispute Resolution More Effective) had recommended that all countries that implement BEPS package of recommendations, must publish comprehensive guidance on Mutual Agreement Procedure (MAP).

Adiyu to DDT.

The Hon’ble Finance Minister, Ms. Nirmala Sitharaman, had presented the Union Budget for the financial year 2020-21 on February 1, 2020, and introduced the Finance Bill 2020  (Bill) in the Lok Sabha. The Bill comprised of financial proposals, including taxation related proposals, to amend the provisions of the Income-tax Act, 1961 (“ITA”) for financial year 2020-21. The final Bill, incorporating certain amendments, was passed by the parliament on March 26, 2020 and received the assent of the President of India on March 27, 2020, and has now been enacted as the  Act  (the “Finance Act”).

One major change that came with the Finance Act is removal of dividend distribution tax making section 10(34), 10(35), 115-O, 115R(2) and 115BBDA of the ITA inapplicable with effect from April 1, 2020. 

Mumbai Tribunal deprecates action of Tax Authority in disallowing claim for application of income by way of donation to foreign universities approved by CBDT

 

This Tax Alert summarizes a decision of the Mumbai Income Tax Appellate Tribunal (Tribunal), dated 24 July 2020, in the case of Tata Education and Development Trust (Taxpayer), wherein the Tribunal has held that the amount spent for charitable purposes outside India, which is approved by the Central Board of Direct Taxes (CBDT), shall be allowed as application of income in the hands of the charitable trust.

Ministry of Commerce and Industry working on an early solution to MEIS issue

Considering the fund allocation and to limit the issuance of any more scrips, the authorities blocked online Merchandise Export From India Scheme (MEIS) module from 23 July 2020. Accordingly, it was intimated that new MEIS applications for registration of shipping bills having ‘Let Export Order’ 1 April 2020 onwards will not be accepted henceforth.

However, realising the difficulties of exporters, during the National Digital Conference on Ease of Doing Business held on 30 July 2020, the ministry has intimated that they are looking for an early solution with respect to the MEIS incentive scheme. Further, they stated there is a cashflow issue and they are discussing with the respective authorities to ensure that exports are not affected.