E-filing of Income Tax return in respect of companies under liquidation.

GENERAL CIRCULAR NO. 41/2011,  Dated 6th July 2011

Subject: E-filing of Income Tax return in respect of companies under liquidation.

The Official Liquidators have reported that they are facing problems in e-filing of Income Tax Returns in compliance as they are required to mention PAN No. of the person who files the return, representing the company  in liquidation.  In the Regional Directors Conference held on 16-6-2011 also, the Official Liquidators brought to the notice of the Ministry that they are not able to file Income Tax Returns since the verification part of the report require them to mention their personal PAN Card No. even when they file the Return as a representative assesee of the company (in liquidation). It was suggested that a PAN Card should be issued in the name of the office i.e. OL……… This PAN No. should be quoted in respect of all returns filed by him as OL. In this regard, Section 139A read with Form ITR-6 (Rule 12) of the Income Tax Act, 1961 were examined.  According to Section 139A of Income Tax Act, 1961, PAN is a must for all assesses for his own income or other income exceeding Rs. 5 lakhs.  Companies are also required to

FAQ ON TAN

Tax Deduction and Collection Account Number (TAN)

Frequently Asked Questions and Answers (FAQs)

1. What is TAN?

TAN or Tax Deduction and Collection Account Number is a 10 digit alpha numeric number required to be obtained by all persons who are responsible for deducting or collecting tax. It is compulsory to quote TAN in TDS/TCS return (including any e-TDS/TCS return), any TDS/TCS payment challan and TDS/TCS certificates.

2. Who must apply for TAN?

All those persons who are required to deduct tax at source or collect tax at source on behalf of Income Tax Department are required to apply for and obtain TAN.

Brought Forward Business Losses can be set off against STCG

Digital Electronics Ltd. vs. Addl. CIT (2011) 49 DTR 484/135 TTJ 419 (Mum.)(Trib.)

Brief Facts

In the course of assessment proceedings, the AO noted that the assessee has set off brought forward losses against short-term capital gains on sale of factory building and plant and machinery. The AO was of the view that in terms of the provisions of section 72, which governs the carry forward and set off of business losses, so much of the carry forward losses as cannot be set off against any profits and gains of business has to be carried forward to the following year upto eight assessment years. The carry forward business losses cannot be set off against any other head of income other than profits and gains of business or profession. It was in this backdrop of these observations by the AO, that the assessee was required to show cause as to why brought forward business losses should not be allowed to be set off against short-term capital gains on sale of plant and machinery and factory building

Held by Hon’ble Tribunal

After hearing both the parties, the Hon’ble Tribunal concurred with the submissions of the assessee & observed that:-

1. Prior to insertion of Sec 50, the sale of factory building/plant & machinery/furniture & fixture was covered by Sec 41(2) wherein the excess of sale proceeds over the WDV was treated as Sec 41(2) profit and the loss, if any, were treated as balancing charge/terminal allowance while computing income from business. Applying the same yardstick, the profit /loss on sale of factory building/plant & machinery/furniture & fixture is to be treated as business income [J.K. Chemicals Ltd. –vs.-ACIT 33 BCAJ (April, 2001) p.36 relied on].

2. Income assessed by the assessee in the relevant year on sale of factory building, plant and machinery although not taxable as profits and gains of business or profession is an income in the nature of business though assessed as capital gains under section 50 and therefore, assessee is entitled to set off of brought forward business losses against the said capital gains. [CIT –vs.- Cocanada Radhaswami Bank Ltd. (1965) 57 ITR 306 (SC) relied on].
 

Procedure for download and merging of split TDS/TCS statement

Procedure for Download of File Merge Utility (in case file is split) and Merging Split Quarterly Consolidated TDS/TCS statement
A.      Procedure for Download of File Merging Utility
1)      Download “File Merge Utility” from TIN website (http://www.tin-nsdl.com/ ) under the option “TAN Registration” in download section. FMU can be downloaded at the desired location for example desktop (see Fig 1.1 below).
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Fig. 1.1
2)      JRE (Java Run-time Environment) [versions: SUN JRE: 1.4.2_02 or 1.4.2_03 or 1.4.2_04 or IBM JRE: 1.4.1.0] should be installed on the computer where the e-TDS/TCS FVU is being installed.
3)      JRE is freely downloadable from http://java.sun.com/ or  http://www.ibm.com/developerworks/java/jdk    or
You may ask your computer vendor (hardware) to install the same for you.
4)      For installing the File Merge Utility, double click on the exe (File_Merger_Utility.exe) file downloaded from the TIN website.
5)      On double clicking, a window will be displayed for extracting the contents of the exe file. Default location for extracting the files will be C drive (see Fig 1.2 below).
6)      The files can also be extracted in any other location (other than C drive). In that case, define the appropriate path by clicking the ‘Browse’ button where the files are to be extracted.

  Fig. 1.2
7)      For extracting the contents of the file click “Unzip” button. On clicking the “Unzip” button, two files as below (see Fig 1.3 and 1.4 below) will be extracted at the default path (C:\File_MERGE_UTILITY) or the desired location as the case may be:
1.File_Merging_Utility.jar
2.FMU.bat

 Fig. 1.3

Fig 1.4
8)      To open the File Merge Utility, double click on the file “FMU.bat” available in the folder where FMU has been installed. On double click of the file, window as below will open (Fig 1.5 below).

Fig. 1.5
2. Procedure for merging the split quarterly consolidated TDs/TCS statement.
1)      Copy all the split files in the single folder at the desired location.
2)      Open the “File Merge utility” by double clicking the file “FMU.bat”.
3)      Click on “Browse” button of “Input file path” and provide path or navigate to path of the folder where all split files are copied (see Fig 1.6 below). Example: files are copied at D drive and the folder name is TDS_TCS_statement.

Fig. 1.6
4)      On navigating to the folder where all the split files are copied, only one file i.e., the first file will be visible (see Fig 1.5 above). Example MUMA00001A_200809_Q4_26Q.zip1.
5)      Select the visible file and click on button “Open” (see fig 1.5 above). Example: files are copied at path D:\TDS_TCS_statement and the input file name is MUMA00001A_200809_Q4.zip1.
6)      Click on “Browse” button of “Output file path” and provide path or navigate to path of the folder where merged consolidated TDS/TCS file is to be created (see Fig 1.7 below). Example: the output file path is D:\TDS_TCS_Statement.

 Fig 1.7
7)      On selecting the location for saving the merged file, click on “Save” button (see Fig 1.6 above).
8)      Click on “Merge files” button available on the File Merge Utility window.
9)      On successful merging of split files message “File merged successfully at xxxxxxxxxxx  (desired location)” will be provided (see Fig 1.8 below)and a merged file in compressed form will be created at the output path. Example the output file path is D:\TDS_TCS_Statement and the file name is MUMA00001A_200809_Q4_26Q.zip

Fig 1.8
10)   Merged file created is password protected.
11)   For extracting the contents of the merged file follow the procedure as provided in the mail received for consolidated statement.
12)   In case of any assistance contact TIN call centre at 020-27218080.

A Compliance Note: Loan to Directors (Section 295)

Section 295 of the Companies Act deals with the pros & cons while giving loan to directors. The section states that No public Company can without the prior approval of the Central Government give any loan to or give any security or guarantee in connection with a loan by any person to ( or to any person by) :

     

a) A Director of the lending co or of its holding company or a partner or relative of any director

b) A firm in which a Director or his relative is a partner

c) A private company in which a director is a director or member

d) Any company in which at least 25 percent of voting power is held or controlled one or more Directors of the lending company

DEFERRED TAX LIABILITY

Deferred Tax Liability is the difference between the provision of tax and actual tax. It is the timing difference that arises because of the tax calculated as per Companies Act and Income Tax Act.

Example:- Provision for Tax in the P/L was Rs. 10,00,000/- however, in September when the ITR was filled the actual tax is Rs. 8,00,000/- only. Thus Rs. 2,00,000/- is the deferred tax liability.

It is the appropriation of the profit and reduces the actual profit. It is not a liability because it is not required to be paid in future.

2*[(ga) of the Sick Industrial Companies (Special Provisions) Act, 1985  "net worth" means the sum total of the paid-up capital and free reserves.

Explanation.-- For the purposes of this clause, "free reserves" means all reserves credited out of the profits and share premium account but does not include reserves credited out of re-evaluation of assets, write back of depreciation provisions and amalgamation.

Thus includes deferred tax liability.

Under section 2(29A) of the Companies Act, net worth means the sum total of the paid up capital and free reserves after deducting the provisions or expenses as may be prescribed.

Explanations:- for the purpose of this clause, free reserves means all reserves created out of the profits and share premium account but does not include reserves created out of revaluation of assets, write back of depreciation provisions and amalgamation.

Thus includes deferred tax liability.

Under Rule 2(d) of Acceptance of Deposit Rule, 1975 free reserve includes the balance in the share premium account, capital and debenture redemption reserve and any other reserves shown or published in the balance sheet of the company and created by appropriation out of the profits of the company, but does not include the balance in any reserve created:

1.      For repayment of  any future liability or for depreciation in assets or for bad debts:

2.      by the revaluation of any assets of the company.

Thus includes deferred tax liability.

THUS, DEFERRED TAX LIABILITY SHOULD BE INCLUDED IN THE NET WORTH.

CBDT Instruction On Grant Of TDS Credit For AY 2011-12

 

Instruction No. 4/2012 [F. No. 225/34/2011-ITA.II], dated 25-5-2012

The Board has decided to withdraw Instruction no. 01/2012 issued on 2nd February, 2012 on the subject above with immediate effect. The following decisions have been taken in this regard:

(i) In all returns (ITR-1 to ITR-6), where the difference between the TDS claim and matching TDS amount reported in AS-26 data does not exceed Rs. Five thousands, the TDS claim may be accepted without verification.

(ii) Where there is zero TDS matching, TDS credit shall be allowed only after due verification.

(iii) Where there are TDS claims with invalid TAN, the TDS credit for such claims is not to be allowed.

(iv) In all other cases TDS credit shall be allowed after due verification.

SEBI Circulars - An Analysis

 

The Securities and Exchange Board of India, vide its Circular no. CIR/MRD/DP/07/2011 dated 16th June 2011 and SEBI/Cir/ISD/3/2011 dated 17th June 2011 respectively, issued the fresh norms for the following: 1. Change of name of Listed Companies; and 2. Shareholding of Promoters/ Promoters group in Demat mode A brief comparative analysis of the existing provisions and the new provisions for both the Circulars is given below: ANALYSIS OF SEBI NORMS FOR DEMAT HOLDING AND NAME CHANGE OF LISTED COMPANIES SHAREHOLDING OF PROMOTERS/ PROMOTERS GROUP IN DEMAT MODE Existing ProvisionsTo remain listed in normal segment of the Stock Exchange all listed companies were required to have atleast 50% of its Public Shareholding, to be in Demat mode. New NormsTo remain listed in normal segment of the stock exchange all listed companies will be required to dematerialize 100% of the Promoters and Promoter’s group Shareholding including group Shareholding including pledge/ usage as collateral. Implications• Till now, there was no mandatory requirement of Promoters’ holdings to be in Demat mode. • Now, in addition to • Now, in addition to 50% Public holding being in Demat mode, 100% of the Promoters’ holding should be held in Demat mode, including pledge/ usage as collateral. • This has to be complied with by the Quarter ended September 2011. • In case a Company fails to comply with the same, the trading of such securities shall take place in trade to trade segment. CHANGE OF NAME OF LISTED COMPANIES Existing Provisions A listed company seeking change of name shall comply with the condition that at least 50% of its total revenue in the preceding 1 year period should have been accounted for by the new activity suggested by new name. New NormsA listed company can change its name if it satisfies either of two criteria:- a. At least 50% of its total revenue in the preceding 1 year period should have been accounted for by the new activity suggested by new name; OR b. The amount invested in the new activity/ project (Fixed Assests + Advances + Work in progress) is at least 50% of the Assets of the Company. The Advances shall include only those extended to contractors and suppliers towards execution of project, specific to new activity as reflected in the new name. Implications• This new Clause will relieve the Companies, which are engaged in business activities, wherein the gestation period is usually longer and the revenue stream is often delayed. • As per the existing norms, a listed Company proposing a name change must make sure that atleast 50% of its total revenues in the preceding 1 year should have been accounted for from the new business activity. • Now, with promulgation of new Norms, the Companies will not be required to wait for the earnings from the new business activity for a name change. Now, the same can be proposed on the basis of their Investments in the new activity/ the Project. Stock Exchanges have been advised to make necessary amendments and implement the above Circulars

No income tax on amount received to meet the cost of Annual medical check-ups

In a major relief to employees, the Government has said they would no longer have to pay income tax on money drawn from welfare funds for annual medical check-ups.  The Central Board of Direct Taxes ( CBDT )) has issued a notification in this regard.  As per the notification, no income tax will be levied “to meet the cost of annual medical tests or medical check-ups of the member, his spouse and dependent children” if money is drawn from the welfare fund to meet the expenses.
Earlier, only cash benefits to a member of the welfare fund on superannuation, illness (including spouse or dependent children), or towards education of dependent children were exempted from income tax.

Exemption from taxation is granted under section 10 of the Income Tax Act. The latest exemption has been given under a clause that deals with income received on behalf of a fund established for the welfare of employees or their dependants.

Also, earlier this year, the government had withdrawn a proposal to impose 5 per cent service tax on services provided by air conditioned hospitals of more than 25 beds and on diagnostic services

Interest free loan is subject to arm’s length test irrespective of commercial expediency

ITA NO. 7354/MUM/11(A.Y. 2007-08)

Tata Autocomp Systems Limited Vs. ACIT

The assessee is a company. It is engaged in the business of manufacture of indoor plastic, rendering engineering services, supply chain management services and administrative support for joint venture companies. The assessee entered into international transactions with its AE and in terms of section 92 of the Act supported the price paid in respect of  the international transaction by filing the necessary Form 3CEB. There is no dispute regarding the price charged by the assessee in respect of international transactions set out in form 3CEB filed by the assessee. The TPO noticed that the Assessee had also made advances of Euro 26,25,000/- to its wholly owned subsidiary a German Company by name TACO Kunstsofftechnik GMBH (hereinafter referred to as TKT). However, no interest was charged on the above loan and no separate TP analysis has been done in respect of this transaction nor was this international transaction referred to in Form 3CEB. The TPO called upon the assessee vide show cause, dated 22.10.2010, to show cause as to why the interest should not be charged on this transaction at the rate of 10.25%.4. The Assessee submitted that the interest free loan was granted to TKT on account of business reasons and commercial expediency.

The Tribunal dismissed the taxpayer’s proposition that only real income should be taxed and noted that these arguments could not be accepted in the context of Chapter X – Special Provisions relating to Avoidance of Tax, of the Act. In this regard, reliance was placed on the decision of Perot System TSI (India) Limited. The Tribunal observed that RBI’s approval was not sufficient from an Indian transfer pricing perspective as the character and substance of the transaction needs to be judged in order to determine whether the transaction has been done at arm’s length.  The Tribunal dismissed the taxpayer’s contention that the loans granted were commercially expedient and economic circumstances did not warrant the charging of interest.

In determining the arm’s length interest rate, the Tribunal placed reliance on the Mumbai Tribunal decision in the case of Tech Mahindra Limited wherein it was held, inter alia, that the arm’s length interest rate should be taken from the country of the borrower/ debtor, i.e. the rate of interest to be used for benchmarking shall be the rate of interest in respect of the currency in which the underlying transaction has taken place in consideration of economic and commercial factors around the specific currency denominated interest rate.

The Tribunal also placed reliance on the decision of the Chennai Tribunal in the case of Siva Industries & Holdings Limited wherein it was held that when the international transaction entered between AE is in foreign currency, than the domestic prime lending rate would have no applicability and the international rate fixed being LIBOR has to be considered;

Based on the aforesaid cases, the Tribunal upheld that the claim of the taxpayer to adopt EURIBOR rate is reasonable and deserves to be accepted.

ALP cannot be applied to determine ‘ordinary profits’ for computing S.10A deduction

ITA No. 2073/(Mds)/2011 – Assessment Year : 2007-08

Visual Graphics Computing Services (India) Pvt. Limited

The provisions of Transfer Pricing regulations contained in Section 92 belong to a separate code enacted for computing income from international transactions having regard to Arm’s Length Price (ALP) so as to confirm that there is no tax avoidance by the taxpayer. Operation of Transfer Pricing provisions ends when the Transfer Pricing Officer passes an order holding that the operating profit of the taxpayer is compatible with ALP norms and no adjustment is necessary.

Limiting the profit eligible for tax holiday under Section 10A(7) read with Section 80IA(10) must be independent of the order of the Transfer Pricing Officer and it is not permissible for the AO to work out the 1 0A deduction on the basis of the ALP profit determined under the order of the Transfer Pricing Officer. ALP is determined based on the MAM which can either be profit based or price based. In case of latter methods, profits are not considered but “derived” from prices and hence the adoption of ALP profits to determine what is “ordinary profits” for the purpose of Section 10A(7) cannot be justified. The Tribunal also considered the decision in the case of Tweezerman (India) Pvt Ltd wherein it was held that the AO was not justified to invoke provisions of Section 80IA(10) read with Section 1 0B(7) so as to reduce the eligible profits on the basis of the ALP computed by the Transfer Pricing Officer without showing how he determined that the tax payer had shown more than ordinary profits.

Whether when assessee has deducted tax at source on payments made to related party, and there is no attempt to evade taxes, even then AO can disallow such payments questioning necessity of availing services from sister concern - NO, rules ITAT

THE questions before the Bench are - Whether when the assessee has deducted tax at source on payments made to its related party, and there is no attempt to evade taxes, even then AO can disallow such payments questioning the necessity of availing services from sister concern and Whether disallowance u/s 40A(2) can be made even if the expenditure is not found to be excessive or unreasonable. NO is the Tribunal's answer.

Facts of the Case

The assessee company is in the business of manufacturing and selling diamonds and CBN grinding wheels, tools, machinery and accessories. The assessee company was a joint venture between M/s Wendt GMBH of Germany and M/s Carborundum Universal (CUMI), with each holding 40 per cent of the assessee’s equity capital and the balance being held by the public. The assessee was part of Murugappa group, headquartered in Chennai. Under an agreement with its AE, the assessee had made a payment to CUMI, as service fees at the rate of 1.5 per cent on value of the products manufactured and sold by the assessee, for services rendered towards administration, financial, legal and taxation matters which included funds management, investments, foreign exchange management and bank loans. Tax was duly deducted at source on these payments.

On scrutiny of the assessee’s income tax return, the AO observed that the assessee had paid service fees to its associate person, while being under the same control and management, which made CUMI a person covered under section 40A(2)(b). The assessee’s explanation for justification of expenditure was found to be general in nature, which did not specify any services which needed specific expertise. The AO noted that the assessee’s agreement with CUMI was brief and basic and did not indicate that it had been prepared by an expert. The assessee company already had a team of professionals looking after financial matters, and the agreement / reports did not reflect any benefit to the assessee’s business. The AO therefore held that the service payment was superfluous expenditure and had no correlation with the business of the assessee whatsoever. The AO disallowed the entire amount and made an addition to the assessee’s income. The AO also disallowed the commission on sales paid to CUMI, for similar reasons.

In appeal, the CIT(A) referred to the CBDT circular, to hold that no disallowance was to be made under section 40A(2) in respect of payments to relatives and sister concerns where there was no attempt to evade tax. The CIT(A) followed the decision of the Karnataka High Court, wherein it was held that so long as there was no intention to evade tax and so long as the expenditure was not shocking, the expenditure was to be accepted. The CIT(A) noted that the assessee had deducted appropriate taxes at source before remitting the amount to CUMI, which was a tax paying entity having positive income. Thus there was no attempt by the assessee to evade tax whereby there could be no disallowance under section 40A(2). The disallowance of service fee and also sales commission paid to CUMI was therefore deleted.

In appeal before the Tribunal, the Revenue side contended that the assessee had failed to prove that CUMI had rendered any services to the assessee. The assessee’s explanation was too general and did not justify the payment of sales commission. Also, CUMI being the associate enterprise of the assessee, fell within the ambit of section 40A(2) whereby it was incumbent on the AO to examine the justifiability of the payments made to it by the assessee.

The assessee submitted that all the details and necessary evidences relating to the services rendered by its associate enterprise CUMI had been furnished before the authorities, which the CIT(A) had considered in detail. Also disallowance under section 40A(2) could only be made where the payment was found to be excessive or unreasonable.

Having heard the parties, the Tribunal held that,

++ undisputedly, the assessee and CUMI were associate persons, whereby the AO had sought to examine the reasonableness of the payment made by the assessee to CUMI;

++ the Gujarat High Court had held that under the provisions of section 40A(2), the AO, being of the opinion that such expenditure was excessive or unreasonable, in relation to any one of the three specified requirements, independent and alternative to each other, could disallow as a deduction so much of the expenditure as considered to be excessive or unreasonable. Applying this decision to the payment in question, the assessee had furnished all evidences relating to the various services rendered, which had been rightly considered by the CIT(A), after taking note of the CBDT circular, that was binding on the Revenue authorities, to hold that the disallowance was not justified;

++ the Karnataka High Court had also held that so long as there was no intention to evade tax and so long as the commission was not shocking, the payment had to be accepted, particularly in the light of the wordings of section 40A(2). Also, it was not the quantum alone that governed such cases but the fair market value of the goods, services and legitimate needs of the business of the assessee had to be the guiding factor in terms of section 40A(2). The CIT(A) had taken into consideration the judicial precedents and also the fact that CUMI was a tax paying entity with positive income before deleting the disallowance. There was thus no reason to take any contra view.

NO TP Adjustment for Corporate Guarantee

S. 92B --International transactions--Transfer pricing--Corporate guarantee provided by assessee to subsidiary does not fall within international transaction--No transfer pricing adjustment required-- Four Soft Ltd. v. Deputy CIT (Hyderabad) . . . 73 Vol 16 - ITAT - ITR

Be Careful while making buy back transactions.

S. 2(22) --Non-resident--Indian company closely held by group holding companies in U. S. A., Singapore and Mauritius--Scheme for buy- back of shares by Indian company--Holding company in Mauritius alone accepting offer to buy-back shares--Capital gains claimed not chargeable in India under Double Taxation Avoidance Agreement with Mauritius--No dividend distributed by Indian company since introduction of dividend distribution tax--Considerable profits allowed to accumulate over years--Scheme for buy-back accepted only by Mauritius holding company--Device to avoid tax in India--Profits arising to be treated as deemed dividend and taxable in India--Indian company to deduct tax at source on sale proceeds-- A , In re (AAR) . . . 343 ITR 455

Method of Calculation of VAT for Civil and Allied Works

Architects, Builders, developer and other providers of Civil and Allied works are assessed to both VAT and Service Tax
With respect to VAT, You have two options to do the Invoicing:

First Method: This method is also known as Method of Composition or Composite method of tax payment. In this case the dealer is liable to pay tax on the total value of theworks contract at the applicable rates. The applicable rates are 2% for civil works andcivil maintenance works & 4% for all other works.
And the highlighting points under this method are

Sale & Lease Back transactions are not “sham” transactions

CIT vs. High Energy Batteries (India) Ltd (Madras High Court)

The assessee purchased igni-fluid boiler from its sister concern and on the same day leased it back. The AO & CIT(A) relied on McDowell 154 ITR 148 and held the sale and lease back arrangement to be a sham & camouflage for a loan by the assessee to the sister concern and rejected the assessee’s claim for depreciation. However, the Tribunal allowed the claim on the ground that the transaction was not a “sham”. On appeal by the department, HELD dismissing the appeal:

DTAA bewteen India and Japan - Amendment

Section 90 of the Income-tax Act, 1961 – Double taxation agreement – Agreement for avoidance of Double Taxation and Prevention of Fiscal Evasion with Foreign countries – Japan – Amendment in Notification No. GSR 101(E), dated 1-3-1990

Notification No. 19/2012 [F. No. 506/69/81-FTD.1]

Whereas the Convention between the Government of the Republic of India and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on income has come into force on the 29th day of December, 1989 after the exchange of Instruments of Ratification as required by paragraph 1 of Article 28 of the said Convention;

And whereas, the said Convention was notified by the Central Government under section 90 of the Income-tax Act, 1961 (43 of 1961) in the Gazetee of India vide No. G.S.R. 101(E) dated 1st March, 1990;

And whereas, clause (a) of paragraph 4 of Article 11 of the said Convention provides the details regarding ‘Central Bank’ and ‘financial institution wholly owned by the Government’ in the case of Japan which will not be subject to tax under paragraph 3 of the said Article, in respect of interest arising to it in the other Contracting State;

And whereas, sub-clause (ii) of clause (a) of paragraph 4 of article 11 refers to ‘international business unit of Japan Finance Corporation’ as one of the financial institutions wholly owned by the Government;

And whereas, both the Government of India and the Government of Japan have now agreed to omit ‘International business unit of Japan Finance Corporation’ from sub-clause(ii) of clause (a) of paragraph 4 of Article 11 and substitute therein “Japan Bank for International Cooperation”;

Now, therefore, in exercise of the powers conferred by section 90 of the Income-tax Act, 1961, the Central Government hereby directs that the following amendments shall be made In the said notification as follows:-

In the said notification, in the Annexure, in Article 11 of the Convention, in paragraph 4, in clause (a), for sub-clause (ii), the following sub-clause shall be substituted, namely:-

“(ii) Japan Bank for international Co-operation;”.

2. This notification shall be deemed to have taken effect from the 1st April 2012.

Tests to determine whether shares gains assessable as STCG or business profits

CIT vs. Gopal Purohit (Supreme Court)

 

The Supreme Court vide order dated 15.11.2010 dismissed the Department’s Special Leave Petition against the judgment of the Bombay High Court in CIT vs. Gopal Purohit 228 CTR 582 (Bom) where it was held that:

 

(a) it was open to an assessee to maintain two separate portfolios, one relating to investment and another relating to business of dealing in shares,

 

(b) that a finding of fact had been arrived at by the Tribunal as regards the two distinct types of transactions namely, those by way of investment and those for the purposes of business,

 

(c) that there should be uniformity in treatment and consistency when facts and circumstances are identical particularly in the case of the assessee and

 

(d) that entries in books of account alone are not conclusive in determining the nature of income though they have a bearing.

Penalties under the Income Tax Act

Penalties under the Income Tax Act

For non-compliance with the different provisions of our Income Tax Act, Section 140A, 143(1A), 221 and 271 to 275 give the reference to levy penalty on a assessee. An assessee might be prosecuted for his comply with the provisions of the law. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of consideration of all the relevant circumstances of the case. Even if a minimum penalty will be justified in prescribed, the authority competent to impose the penalty will be justified in ignoring the penalty when there is technical or minor breach of the provisions of the Act. QUANTUM OF PENALTY An authority cannot levy the penalty less than the prescribed one. While imposing penalty it is very important to note that the quantum of penalty shall be as per the law on date of default and not as per the law on the date to which the assessment relates. The Supreme Court’s decision in the case of Brij Mohan(supra) has ITRp.1(S.C)], following the Supreme Court’s decision, the Patna High Court held that the penalty imposed on account of the commission of a wrongful act is committed will be the law which is to be applied and in accordance with which the penalty is to be imposed. Before the levy of any penalty, the assessee must have been heard or a reasonable opportunity of being heard must be given to the assessee. If penalty is imposed without such an opportunity, it will be invalid. PENALTY IMPOSED UNDER MORE THAN ONE SECTION Penalty may be imposed under more than one section at a time, if an assessee commits many defaults under various sections of the Act. The various types of penalties can be summarized in the following manner:-   Section Type of Default Minimum Penalty Maximum Penalty Levied By 158BF Determination of undisclosed income of block period. 100% of tax leviable in respect of undisclosed income. 300% of tax leviable in respect of undisclosed income. Commissioner (Appeals) or Assessing Officer) 221(1) Non -payment of tax and interest payable under section 220(2) within the prescribed time limit. Such amount as the Assessing officer may impose. Tax in arrears. Assessing Officer. 271(1)(b) Failure to comply with (i) a direction u/s 142(2A) or, (ii) a notice under section 115WD(2);115WE; 142(1);143(2) Rs. 10000 for each failure. Rs. 10000 for each failure. Assessing officer. 271 (c) Furnishing of inaccurate particulars of income or Concealment of the particulars of income. 100% of tax sought to be evaded. 300% of the tax sought to be evaded. Commissioner (Appeals) or Assessing officer. 271(4) Distribution of profit by registered firm otherwise than in accordance with the partnership deed and as a result of which partner has returned income below the real income. Upto 150% of difference between tax on partner’s income assessed and tax on returned income in addition to tax payable. Upto 150% of difference between tax on partner’s income assessed and tax on returned income in addition to tax payable. -do- 271A Failure to keep, maintain or retain books of account etc. as  required under Section 44AA Rs. 25000 Rs. 25000 Assessing Officer or Commissioner (Appeals) 271AA Failure to keep and maintain documents and information in respect of international transaction. A sum equal to 2% of the value of each international transaction. A sum equal to 2% of the value of each international transaction. -do- 271B Failure to get accounts audited under Section 44AB or furnish audit report along with return of income. ½% of Total Sales, Turnover or gross receipts. Rs. 100000 Assessing Officer 271BA Failure to furnish report under Section 92E. Rs. 100000 - -do- 271BB Failure to subscribe to eligible issue of capital. 20% of the amount subscribed.   Joint Commissioner.   271C Failure to deduct tax at source or failure to pay wholly or partly the tax u/s 115-O(2) or second proviso to Section 194-B. A sum equal to the amount of tax omitted to be deducted or paid. - -do- 271CA Failure to collect tax at source. 100% of tax sought to be collected. - -do- 271D Taking any loan or deposit in contravention of Section 269SS. A sum equal to the amount of loan or deposit so taken or accepted. - -do- 271E Repayment of any loan in contravention of Section 269T. A sum equal to the amount of deposit. - -do- 271F Failure to furnish returns as required by Section 139(1) and the proviso to Section 139(1) on or before due date. Rs. 5000 Rs. 5000 Assessing Officer. 271FA Failure to furnish Annual Information Return. Rs. 100 for each day of default. - -do- 271G Failure to furnish document or information under Section 92D. A sum equal to 2% of the value of each international transaction. - Assessing Officer or Commissioner (Appeals). 272A(1)(a) Failure to answer any question put to person legally bound to state the truth of any matter touching the subject of his assessment by an income – tax authority. Rs. 10000 for each default. Rs. 10000 for each default. Joint Director or Joint Commissioner. 272A(1)(b) Failure to sign any statement made by a person in course of income – tax proceedings. Rs. 10000 for each default. Rs. 10000 for each default. -do- 272(1)(c)   Failure in compliance with summons issued under section 131(1) to attend office to give evidence and produce books of accounts or other documents.   Rs. 10000 for each default. Rs. 10000 for each default. Joint Director or Joint Commissioner 272A(2) Failure to comply with a notice under section 94, to give notice of discontinuance of business/profession under Section 176(3); furnish returns/statements specified in Section 133,206,206A,206B or 285B; to allow inspection of (i) register mentioned in Section 134, or (iii) entry in such register, or (iii) allow copies thereof to be taken, furnish return of income under Section 139(4A) or, deliver declaration under Section 197A; furnish certificate under Section 203, deduct and pay tax under Section226. Rs. 100 for every day of default Rs. 100 for every day of default. Joint Director or Joint Commissioner (Chief Commissioner or commissioner in case of default under Section 197A) 272AA(1) Failure in compliance with Section 133B Any amount subject to a maximum of Rs. 1000. Rs1000. Joint Commissioner/Asstt Director/Assessing Officer. 272B Failure to comply with Section 139A (PAN). Rs. 10000 - Assessing Officer. 272BB Failure to comply with Section 203A. - Rs. 10000 Assessing Officer. 272BBB Failure to comply with Section 206CA (TCAN) Rs. 10000 - -do-