Linklaters LLP Ruling - Impact on Taxability of Professional

In a recent ruling in ITA no 4896/Mumbai /03, Hon’ble Income Tax Appellate Tribunal ( ITAT Mumbai / The ITAT ) has delivered a land mark decision, in the case of  Linklaters LLP Vs Income Tax Officer – International  Taxation. In the ruling The ITAT Mumbai has analyzed in great detail various issues involved in the facet of International Taxation. Apart from the issues which arose before the Mumbai ITAT in cross appeals filed by the assessee and the revenue, Mumbai ITAT took cognizance of the powers of ITAT on the issue of admission of a new issue  at this stage of appeal which has not been taken up by the lower authorities during proceedings before them. Through this article an attempt has been made to summaries the  observation of the Mumbai ITAT and its impact on the taxation in India on fee for professional Services rendered in India through a PE in or from outside India.

Back Ground

·         The assessee is a United Kingdom (U K) based partnership law firm headquartered in London, a fiscally transparent entity (An entity which is not taxable in its own hand) in UK not having any branch, office or any other form of presence in India.

·         The assessee firm rendered professional services (Services) to clients in India both within India as at times it’s personnel visited India for provision of services as well from outside India.  

·         The assessee filed its return of income in India for AY 1995-96 disclosing NIL income claiming that since assessee does not have a Permanent Establishment [PE] in India within the meaning of Article 5(1) of Double taxation Avoidance Agreement between India and UK [The Treaty], thus not liable to tax in India for income earned from such Services either under The Income Tax Act 1961 (the Act) or under Article 7 of or Article 15 of The Treaty.  

·         Without prejudice to this assessee filed an income computation statement of the PE taking a notional per hour rate which a lawyer in India is likely to earn from rendering of similar services. Further for this quantification the assessee considered the charges for services rendered in India Only.

·         The Assessing officer ruled that permanent establishment of assessee exits in India within the meaning of Article 5(2)(k) of The Treaty, thus the income of the PE is taxable in India as per article 7 of the said Treaty under domestic laws as “Business profits”

·         He did not accept the notional quantification of the profits of the PE by assessee and quantified the profits on actual charge basis including services provided by PE from outside India as well.  

·         On Appeal, the Learned CIT(A) allowed the appeal against the assessee on the issue of PE creation and quantification of Income of the PE. However the CIT(A) ruled in favour of the assessee on the issue of attribution of profits to PE and concluded that only services rendered by the PE in India are taxable in India.

As a result of the order of CIT(A), cross appeals came up before the Mumbai ITAT raising the following issues for consideration by the Hon,ble ITAT

1          Whether the total income of the appellant be determined at Rs. Nil as returned.

2.         Whether the appellant had a permanent establishment in India under Article 5(2)(k) of the Tax Treaty between India and the U.K.

3.         Whether the income of PE computed by the appellant at the notional rate per hours charged at appropriate rates for an Indian lawyer be accepted.

4          Whether the assessee was taxable in respect of only that portion of income that was related to services performed in India.

5          Whether the “force of attraction” principle in Article 7 of the Indo UK DTAA.” has been correctly appreciated.

Apart from the above issues raised by the aggrieved parties, another issue came up before the Mumbai ITAT during the course of proceedings  -

6          Whether the assessee being a fiscal transparent entity in U K. is eligible for benefits under The Treaty

7          Whether ITAT, at the proceeding before it,  has powers to examine an issue which has not been examined by the lower authorities.

The Mumbai ITAT considered the rival submissions carefully and analyzed the issues before it in the light of prevailing provisions of The Income Tax Act 1961, various judicial pronouncements on the subject available domestically and globally, expert opinions, commentary on model tax convention and delivered the decision on various issues as following  -

Taxability under the domestic law

           

Assessee’s case

·         Following the ratio decidndi by Mumbai High Court in the case of Clifford Chance (318 ITR 237), income of the assessee provided from outside India can not be taxed in India.

·         Since the provisions of The Treaty are more beneficial they have the overriding effect over the provisions of The Indian Income Tax Act, 1961, hence income from service provided in India also can not be taxed in the absence of a PE. 

Revenue’s Case

·         The assessee has a business connection in India with in the meaning of section 9 of The Act as it has a PE in India within the meaning of Article 5(2)(K) of The Treaty. Thus the income of the assessee is taxable in India as business profits under Article 7 of the treaty.

·         The assessee being a fiscal transparent entity, is not eligible for the benefit under  The Treaty, it’s Income is taxable in India under Article  15 of The Treaty.

Mumbai ITAT ruling  

·         The ruling of Hon,ble Mumbai High Court in the case of Clifford Chance and the decision of Apex Court in the case of Ishikawajima Harima Heavy Industries [2007] 288 ITR 408 relate to a period before the amendment in Section 9(1)(vii) of The Income Tax Act 1961 by Finance Act 2010.

·         The legal premise of the above rulings

o   That Income from services sought to be taxed in India must be provided and utilized in India and  

o   “Territorial nexus of taxation”

·         are no longer  good law after the amendment in the Act. Now there is no need for such services to be rendered in India for taxability in India. The amendment in Section 9 (1)(vii) has rendered both the above rulings redundant.

·         The territorial tax system is prevalent in very few countries, that too with riders, hence can not be termed as an internationally accepted systems. The source and residence rule of income  is followed worldwide. 

·         To avoid double taxation of income in more then one tax jurisdiction, the mechanism of DTAA is in place and provision of such treaties have overriding effect on domestic laws to the extant these are more beneficial to the assessee.

The ruling of the ITAT has thrown light and cleared dust around litigative matter of taxation of income of professional services in India. Though this ruling has unsettled position emerged on the issue after the rulings of Mumbai High Court in the case of Clifford Chance and the decision of Apex Court in the case of Ishikawajima Harima Heavy Industries [2007] 288 ITR 408, however this ruling has  put rest to the controversy on the issue post amendment in the Act. This ruling once again remind us how venerable are the matter settled by even Apex Court of the land as they can be unsettled by a legislative amendment making mockery of the judicial system. 

Existence of assessee’s permanent establishment in India under Article 5(2)(k)

Assessee’s Case

·         Article 5(1) of the treaty contains the general condition for creation of a PE and Article 5(2) of The Treaty contains list of examples prima facie constituting a PE. The general conditions of Article 5(1) are to be necessarily satisfied before such examples are considered to be a PE.

·         There was no continuity of activities in India and the personnel of the firm visited India only as and when required basis.

·         The activities of the assessee were sporadic or isolated and with no infrastructure, no continuity or stability so as to result in a PE.

·         The assessee do not involve furnishing of services as envisaged in Article 5(2)(k) of The Treaty but is rendering services directly to its clients.

Revenue’s case

·         If permanent establishment under Article 5(2)(k) comes into existence only when provisions of Article 5(1) are to be satisfied, “the provisions contained in Article 5(2)(k) would be rendered redundant. The specific provisions prevail over the General provisions.

·         ‘Rendering of services’ is not distinct from ‘furnishing of services’. The expression ‘rendering’ and ‘furnishing’ are synonymous. In the context of PE creation, this question of ‘rendering’ or  ‘furnishing’ of services is not relevant.

Mumbai ITAT Ruling -

·         The Article 5(1) of The treaty consist of ‘basis rule PE’, however there are three criteria embodied in the definition, one physical location criteria, two right to use that location criteria and carrying out the business from that location criteria.

·         Article 5(2) consist of two categories of PE, first Illustrations what constitute PE [ Clause  (a) to (i)], second what is extension of basic rule i.e. deemed PE { Clause  (j) and (k)}. These two categories are contained in all the major Model Tax Conventions be it UN, OECD or US model.

·         The express provisions of OECD Model Tax Convention, that a building or site etc. constitute a PE only if that last for certain period of time, and UN Model commentary, that scope of the of the provisions of Article 5(3)(b) extend beyond the basic rule, imply that the provisions of these clauses are deeming in nature.

·         The interpretation of Article 5(1) and 5(2) as given by the assessee is contrary to well established principle of statutory interpretation that an inclusive definition is intended to add to the primary meaning, so as to bring within its scope items which may or may not fall within the scope of primary definition.

·         There is no legally sustainable merits in plea that professional services can only be ‘rendered’ and not ‘furnished’, and the connotations of furnishing of services cannot be extended to rendering of services. That connotation of ‘rendering’ also extend to “to give or make available;

·         The expression ‘rendering’ and ‘furnishing’ are somewhat interchangeable in normal course of business, and it will be too pedantic and hyper technical an approach to narrow down the meaning of the expression ‘furnishing’ to exclude rendering of professional services.

·         A treaty, is to be interpreted in good faith on the basis of general expectations of the parties and in accordance with the ordinary meaning given to the treaty in the context and in the light of its objects and purpose.

Quantification of Taxable Income on the basis of prevailing market prices of

similar services, in view of independence fiction of Article 7 (2)

Asseesse’s case

·         Under article 7(2) of The Treaty, the profit attributable to PE are not the actual profit but the hypothetical profits which the PE is expected to make under the similar condition, if PE was wholly independent of its’ General Enterprise (GE).  

Revenue’s Case

·         For computation of PE profits, there is no justification for disregarding the actual incomes attributable to PE and adopting hypothetical amounts. The place of accrual of income is not the place where these services are rendered but where the services are utilized.

·         It is only elementary that what to be charged to tax is real income and not the notional income which the assessee could have earned under an imaginary state of affairs.

Mumbai ITAT Ruling

·         PE is nothing but a part of the General  Enterprise itself. Fiction of hypothetical independence in Article 7(2) is confined to a PE’s transactions with its GE. The fictional independence under Article 7(2) does not travel beyond the transactions with entities other than the GE, and the other PEs belonging to the same GE.

·         The principle set out in Article 7(2), helps ascertainment of taxable profits in each of the tax jurisdiction involving more than one tax jurisdictions transaction and the transaction values in case of such intra organization transactions are taken at an arms length price.

·         The plea that arms length price adjustment can be made in respect of the transactions with the clients of the assessee is not acceptable. The revenues earned by the assessee are to be taken at actual figures with no adjustments.

A detailed analysis of the treaty provision, on the issues of PE creation and  fiction of hypothetical independence in Article 7(2),  and application in the context has been brought out by this ruling and is land mark in interpretation of the treaty provisions clearly setting a path for the assessee’s and the tax authorities to follow in the future.

Assessee’s entitlement to the benefits of India UK tax treaty

Assessee’s case

·         The expression “liable to tax” must include the person who is under an obligation to file the income tax return, in whose hands the income is determined and from whom taxes are recovered.

·         The Partnership firms, including a foreign partnership are treated a taxable Under Income Tax Act, thus making it “liable to tax” in India, thus a partnership firm is entitled to the treaty benefits.

Revenue’s Case -

·         The Treaty benefits apply only to a person who is resident of both or one of the contracting states as per article 1(1).

·         The definition of term ‘resident of a contracting state’ as per Article 4 (1) of the treaty means any person who, under the law of that state, is liable to taxation therein by reason of his domicile, residence, place of management, or any other criterion of similar nature.

·         The assessee firm was a fiscally transparent entity not liable to tax in UK in its own right, it  does not confirm the conditions laid down in article 4 (1), hence is not entitled to treaty benefit in India.

Mumbai ITAT Ruling  -

·         A partnership firm is a person under article 3(2) of The Treaty as it is treated taxable under The Income Tax Act 1961.

·         The expression ‘liable to tax by reasons of his domicile, residence, place of management or any other criterion of similar nature’ refers to a situation in which a person is liable to tax in a tax jurisdiction by the virtue of a locality related attachment which leads to residence type taxation.

·         Whether the partnership is liable to tax, depends how the amount of tax payable on the partnership income is determined, whether in relation to the personal characteristics of the partners or not. If yes, then the partnership itself would not be considered liable to tax. If the income is computed at the level of partnership, before being allocated to the partners, but the tax is technically paid by the partnership or that it is assessed on partnership will not change that result”.

·         “Taxability of entire income” in the residence state, rather than the “mode of taxability there”, should govern the Treaty benefit entitlement. When a partnership firm is taxable in respect of its profits not in its own right but in the hands of the partners, as long as entire income of the partnership firm is taxed in the residence country, it is entitled for treaty benefits.  

While ruling so the ITAT has analyzed and confirmed the judgment of ADIT Vs Green Emirates Shipping & Travels (100 ITD 203), which deals with the issue of entitlement of India UAE tax treaty benefits to UAE resident who are not actually liable to pay any personal income tax in UAE. ITAT observed that the actual payment of tax in one state is not a condition precedent to avail the benefits of DTAA in the other Contracting State. The tax treaty prevents not only 'current' taxation but also ‘potential' double taxation. The right to tax residents vests only with principal State under a tax treaty, that right, whether that right exercised or not, continues to remain exclusive right of that state.

This ruling of ITAT on this issue has far reaching implication on this contentious issue of treaty benefit to a fiscally transparent entities no direct Indian judicial  pronouncement was available.

Application of force of attraction principle in computation of profits attributable to the PE.

The ITAT approved ruling by the Hon’ble Authority for Advance Ruling in the case of Steffen, Robertson & Kirsten Consulting Engineers & Scientists, In Re (230 ITR 206), where the AAR ruled that the statutory test for determining the place of accrual of income is not the place where these services are rendered but where those services are utilized”. Whether the accrual of income is in respect of fees for technical services or in respect of professional fees, that does not alter the nature of deeming fiction under Section 9(1) of the Income Tax Act. This position is further fortified by the retrospective amendment to Section 9(1) by insertion of new Explanation thereto.

ITAT Disapproved the decision ITAT Mumbai in case of Clifford Chance and Mumbai High Court Decision in Clifford Chance case with which the ITAT Mumbai decision is merged and held that in the wake of retrospective amendment in section  9(1)(vii), these decision hold no good law.

The Article 7 of The Treaty provides PE, profits of the enterprise may be taxed in the other State but only so much of them as is “directly or indirectly attributable to that permanent establishment”. The inclusion of ‘profits indirectly attributable to the PE’ clearly incorporates a force of attraction principle in the treaty. ITAT further observed tat the basic philosophy underlying the force of attraction rule is that when an enterprise sets up a permanent establishment in another country, it brings itself within the fiscal jurisdiction of that another country to such a degree that such another country can properly tax all profits that the enterprise derives from that country ‐ whether the transactions are routed and performed through the PE or not.

The ITAT observed that the twin conditions to be satisfied for taxability of related profits are (i) the services should be similar or relatable to the services rendered by the PE in India; and (ii) the services should be ‘directly or indirectly attributable to the Indian PE’ i.e. rendered to a project or client in India. In effect thus, entire profits relating to services rendered by the assessee, whether rendered in India or outside India, in respect of Indian projects is taxable in India.

The ruling of the ITAT on the subject of the “force of attraction of rule” is one of the first in the judicial history of Tax treaty. This will set example for assessee and the authorities below for deciding the issues on merit. 

On the powers of the ITAT to consider / admit a new issue 

Following the Special Bench Of the Tribunal in the case of Tata Telecommunication ltd Vs DCIT (121 ITD SB 384) where dealing with the similar issue the Special Bench has observed as following  -

            “There is no escape from it’s duty to ensure that the requirement of the section  are           fully complied and the tribunal can not shun away from its duty to examine all the            eligible conditions merely on the ground that some of these conditions are not     specifically rejected by the authorities below”.

            Taking a cue from the Rule 11 of the Appellate Tribunal Rules 1963, The ITAT         observed that there are no restrictions on the Tribunal as to on what grounds the    Tribunal decides the appeal. The only rider is, in terms of proviso to Rule 11, that “       the Tribunal shall not rest its decision on any other ground unless the party who            may be affected there by has had a sufficient opportunity of being heard on that             ground”.

Tribunal further observed that the expressions ‘subject matter of appeal’ and ‘grounds of appeal’ cannot be used interchangeably as they have distinct connotations. While the Tribunal cannot enlarge the scope of ‘subject matter of appeal’ but, within the subject matter of appeal, the Tribunal can examine any aspect of the matter – whether the same has been examined by the authorities below or not.

The decision of ITAT confirms to the earlier judicial pronouncement by authorities and will the appellant in seeking relief from the various issues which has not be adjudicated by the lower authorities.

On Treaty Interpretations

Tribunal held that the fundamental purpose of tax treaties is to  ensure that cross border transactions are not taxed twice, ITAT further observed that certain rules should be followed for interpretation of a treaty provisions. Such an observation from the ruling of the ITAT will help in the treaty interpretation and making decision in numerous cases pending before appellate authorities on issue of  treaty benefits. Following are principal as suggested by ITAT for treaty interpretation  - 

ü  A tax treaty is an agreement between two countries dealing with taxes, the principles adopted in the interpretation of statutory legislation are not applicable in interpretation of treaties.

ü  A tax treaty is to be interpreted in good faith in accordance with the ordinary meaning given to the treaty in the context and in the light of its objects and purpose.

ü  A  tax treaty is required to be interpreted as a whole, i.e.  the provisions of the treaty are required to be construed in harmony with each other.

ü  The words employed in the tax treaties not being those of a regular Parliamentary draughtsman, the words need not examined in precise grammatical sense or in literal sense.

ü  Departure from plain meaning of the language is permissible whenever context so requires, to avoid the absurdities and to interpret the treaty in such a manner as to make it workable rather than redundant.

ü  A literal or legalistic meaning must be avoided when the basic object of the treaty might be defeated or frustrated. Words are to be understood with reference to the subject matter.

ü  The words employed in the treaty are to be given a general meaning general to lawyers and general to layman alike.

ü  The meaning of the undefined terms in a tax treaty should be determined by reference to all of the relevant information and all on the relevant context. There cannot be any residual presumption in favour of a domestic law meaning of a treaty term.

Income-tax Treatment of Expenditure Incurred in Connection with Issue of Shares

Treatment of share issue expenses can be explained under two categories-

1. Issue expenses expended at the time of inception of company,
2. Subsequent Issue Expenses.

1. Issue expenses expended at the time of inception of company:
As per Section 35D(2)(c)(iii) or (iv) of the Income Tax Act, before the commencement of his business, Any expenditure incurred by the company by way of fees for registering the company or in connection with the issue of shares in or debentures of the company, being underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus, the assessee shall be allowed a deduction of an amount equal to one-fifth of such expenditure for each of the five successive previous years.
2. Subsequent Issue Expenses:

Provisions of Section 269SS and 269T under Income Tax Act

 

Finance is the important part and need of every business. The own capital of a person may not be always sufficient to meet the needs of finance of the business. Therefore the Loans and deposits become necessary and important to meet the financial needs of the business. But while taking loans and accepting deposits one also has to keep in mind the restrictions imposed under the Income Tax Act on the mode of taking such loans and deposits.

Such provisions regulating the mode of accepting or taking loans or deposits and mode of repayment of certain loans and deposits are contained under section 269SS and 269T of the Income Tax Act 1961.

Know online status of claim under EPF (employee provident fund)

The Employees’ Provident Fund Organisation has launched a facility for online verification of status of the claim under the EPF.

The facility can be availed at  http://59.180.233.84/homepage_claim_status_new.php 

The user needs to select his State, the EPF office, Establishment Code, Extension code, if any and then enter the employee number to ascertain the claim status.

Know Your Claim Status – How to use the facility?

S. 147:Assessment – Reassessment292BB Delay in issue of notice under section 143(2), notice renders assessment invalid. (S. 292BB)

The Assessing Officer issued a notice under section 148 to reopen the assessment. Though the
assessee filed a ROI, the Assessing Officer did not issue the section 143(2) notice within the
prescribed period but passed a draft assessment order under section 144C. The Court had to
consider (a) what is the effect of the failure to issue notice under section 143(2) within the period
stipulated in the proviso to clause (ii) and (b) the effect of section 292BB of the Act. HELD by the
Court quashing the assessment proceedings:
(i) The service of notice under section 143(2) within the statutory time limit is mandatory and is
not an inconsequential procedural requirement. Omission to issue notice under section 143(2) is
not curable and the requirement cannot be dispensed with. Section 143(2) is applicable to
proceedings under section 147 & 148. While the Proviso to section 148 protects and grants liberty
to the Revenue to serve notice under section 143(2) before passing of the assessment order for
returns furnished on or before 1.10.2005, in respect of returns filed pursuant to notice under
section 148 after 1.10.2005, it is mandatory to serve notice under section 143(2) within the
stipulated time limit (Hotel Blue Moon 321 ITR 362 (SC) referred).
(ii) Section 292BB incorporates the principle of estoppels and stipulates that an assessee who has
appeared in any proceeding and co‐operated in any enquiry relating to assessment or reassessment
shall be deemed to be served with any notice which was required to be served and would be
precluded from objecting that the notice was not served upon him or was served upon him in an
improper manner or was not served upon him in time. However, the principle of estoppels does not
apply if the assessee has raised objection in reply to the notice before completion of assessment or
reassessment. As the Assessing Officer had passed a draft assessment order and the assessee had
raised an objection before completion of assessment, the estoppel in section 292BB did not apply
and the section 147 proceedings could not continue.
Alpine Electronics Asia Pte Ltd. v. DGIT( 2012) 341 ITR 247 (Delhi)(High Court) http://www.itatonline.org/

S.80IB(10):Deduction – Undertaking Developing and building Housing Project Eligible even if developer not “owner” of land.

The assessee entered into a ‘development agreement’ with the owner of the land pursuant to which
it agreed to develop the land. Deduction under section 80‐IB(10) in respect of the profits arising
from the said activity was claimed on the ground that it was “derived from the business of
undertaking developing and building housing project approved by the local authority”. The
Assessing Officer & CIT(A) rejected the claim on the ground that the assessee was not the “owner”
of the land and that the approval of the local authority to, and the completion certificate of, the
“housing project” was given to the owner and not to the assessee. However, the Tribunal allowed
the claim. On appeal by the department to the High Court, HELD dismissing the appeal:
Section80IB(10) allows deduction to an undertaking engaged in the business of developing and
constructing housing projects. There is no requirement that the land must be owned by the
assessee seeking the deduction. Under the development agreement, the assessee had undertaken
the development of housing project at its own risk and cost. The land owner had accepted the full
price of the land and had no responsibility. The entire risk of investment and expenditure was that
of the assessee. Resultantly, profit and loss also accrued to the assessee alone. The assessee had
total and complete control over the land and could put the land to the agreed use. It had full
authority and responsibility to develop the housing project by not only putting up the construction
but by carrying out various other activities including enrolling members, accepting members,
carrying out modifications engaging professional agencies and so on. The risk element was entirely

Vodafone Verdict Is Wrong: Prashant Bhushan

 

Prashant Bhushan launches a scathing criticism of the Vodafone verdict and argues that India will be seen as a “banana republic” where foreign companies can loot our resources and even avoid paying taxes on their windfall gains from the sale of those resources.
 

Prashant Bhushan, legal crusader, has launched a scathing criticism of the judgement of the Supreme Court in Vodafone International vs. UOI. In an article published in the Hindu, Prashant Bhushan argues that the Supreme Court has again made a wrong call on tax avoidance and set a precedent that jeopardises thousands of crores of potential revenue for the exchequer.

Prashant Bhushan points out that tax avoidance through artificial devices has become a very lucrative industry today and that a large part of the income of the ‘Big 5′ accountancy and consultancy firms is derived from such schemes. McDowell 154 ITR 148 (SC) had put the issue in the correct perspective, though two later decisions (Azadi Bachao Andolan & Wallfort) reverted to calling artificial tax avoidance devices “legitimate tax planning” rues Prashant Bhushan.

Prashant Bhushan contemptuously calls Mauritius companies set up by third-country foreign companies as ‘Post Box Companies‘ and says that the benign attitude of the Indian tax authorities has resulted in “blatant evasion“. He also singles out Yashwant Sinha, the then Finance Minister, for responding to the distress call of the FIIs and issuing the circular which stated that once a company had obtained a tax residence certificate from Mauritius, it would not be taxed in India. The government’s appeal against the verdict of the Delhi High Court which had struck down the Circular effectively offered a tax holiday to the FIIs rues Bhushan. The consequent judgement of the Supreme Court (Azadi Bachao Andolan 263 ITR 706 (SC)) which called this device an act of legitimate tax planning was in defiance of the Constitution bench judgment in McDowell 154 ITR 148 (SC) says Bhushan.

Prashant Bhushan rues that though in Vodafone, the Supreme Court had the opportunity to correct the transgression of the McDowell 154 ITR 148 (SC) principle, it did not do so. Instead, the Court held that despite the fact that the entire object and purpose of the transaction between Hutch and Vodafone was to transfer the shares, assets and control of the Indian telecom company to Vodafone, the transaction has nothing to do with the transfer of any asset in India!

Sec. 206 AA

Sec. 206 AA of Income tax act 1961 (effective from 1.4.2010) was once a hot topic not only in India, but also some other countries which have financial dealings with India. These Non obstante clauses have been historically known to be plaguing our interpretations in Income Tax Law. A few glimpses in the wake of this section as below,

The below discussion may not be a moot point. There have been views that the provisions of Sec.206 AA should not be applicable to Expatriates as any amendment to the taxation law of a country cannot be done unilaterally to override the provisions of DTAA with another country. In this regard the following counter argument is presented. In any DTAA, there is an article that will speak for non discriminatory treatment of foreign nationals in the other contracting state (Article 26 in USA and UK treaties). The ruling is as below,

DIRECTOR’S RESPONSIBILITY FOR DISHONOUR OF CHEQUES?

We need not go into the background concerning the usage of cheque and it is a reality now that the payments through cheque have become an indispensable part of the mercantile community and even the public in general. In fact, payments through cheque is encouraged and made mandatory in view of certain regulations and as a best accounting practice. Considering the usage of cheque and its significance and in order to give the needed credibility to the cheque, the legislature has thought it fit to bring a stringent law dealing with dishonor of cheques. As a result, the Negotiable Instruments Act, 1881 was amended and 138 to 142 have been introduced in the Act specifically dealing with dishonor of cheques.  Before the introduction of section 138 to 142, an act of dishonour of cheque is considered as a civil issue and the aggrieved is only provided with Civil Remedy which consumes lot of time and also costly.  The

TDS: Extended time limit in s. 201(3) Proviso does not save proceedings initiated before 1.4.2010 even if order passed after that date

ACIT vs. M/s. Catholic Relief Services (ITAT Delhi)

Pursuant to a search conducted on 11.09.2007, the AO passed an order dated 27.4.2010 u/s 201(1) / 201(1A) for FYs 2002-03, 2003-04 and 2004-05 in respect of TDS on salary & perquisites of expatriate employees. The assessee relied on NHK Japan Broadcasting Corp 172 TM 230 & Hutchison Essar Telecom Ltd 323 ITR 230 (Del) & argued that as the order was passed after 4 years from the end of the FY, it was barred by limitation. The AO relied on the Proviso to s. 201(3) inserted by the FA 2009 w.e.f. 1.4.2010 which provides that an order for a financial year commencing on or before 1.4.2007 may be passed at any time on or before 31.3.2011. The CIT (A) allowed the appeal on the ground that one had to see the law as of the date of initiation of proceedings and held that the order was beyond limitation. On appeal by the department, HELD dismissing the appeal:

The Chennai Tribunal have held that penalty under section 271G of the Income-tax Act, 1961 [“the Act”] cannot be levied for benign reasons in the nature of procedural issues provided the taxpayer has maintained substantial documentation in support of its arm’s length price.

Executive Summary
The Chennai bench of the Income Tax Appellate Tribunal (“The Tribunal”) recently pronounced its ruling in the case of SSL-TTK Ltd. (Appeal no. ITA No. 544/Mds/2011), wherein the Tribunal ruled that a notice issued by the Transfer Pricing Officer [“TPO”] under section 92CA (3) of the Act cannot be considered as a notice issued under Section 92D (3) and hence non-compliance of the taxpayer would not attract levy of penalty under Section 271G1 of the Act. Further, the taxpayer had made substantial compliance of filing the information as required by the letter issued by the TPO and the arm’s length price was accepted by the TPO.

Tax Deducted at Source – Due date and Manner of Payment

Tax deducted by the deductor should be paid with the department within time so that the deductees can take the credit of the same while filing their returns to avoid double taxation on their income. Few important provisions in relation to tax deducted at source (TDS) have been provided below:
Chargeability of tax at source
Tax is to be deducted in the following manner:

Whether when assessee pays the entire tax with interest before conclusion of penalty proceedings, immunity u/s 271AAA(2) cannot be denied to assessee - YES, rules ITAT

THE issues before the Tribunal are - Whether when assessee pays the entire tax with interest before conclusion of penalty proceedings, immunity u/s 271AAA(2) cannot be denied to the assessee and whether when the statute does not prescribe any time limit for payment of tax with interest, AO cannot lay down any outer limit of payment before filing of tax return. And the questions are answered in favour of the assessee.

Facts of the case

On 30th August 2007, the assessee company and certain associated entities, collectively referred to as Pioneer Group, were subjected to search and seizure operations under section 132 of the Act. During the course of this operation, the assessee made a disclosure of Rs 50,00,000. There was no dispute that the income so declared was included in the income subsequently returned by the assessee, vide income tax return filed on 28th September 2008. The assessment under section 143(3) was

If brokerage offered to tax, the principal debt qualifies as a “bad debt” u/s 36(1)(vii) r.w.s. 36(2)

CIT vs. Shreyas S. Morakhia (Bombay High Court)

The assessee, a share broker, claimed deduction u/s 36(1)(vii) of Rs.28.24 lakhs as a “bad debt” being the amount due to him by his clients on account of transactions of shares effected by the assessee on their behalf which had become irrecoverable. The AO rejected the claim on the ground that as the assessee had offered only the amount of brokerage as income and not the entire amount due from the client, the condition in s. 36(2) that the amount of bad debts must be taken into account in computing the total income was not satisfied. The CIT (A) & the Special Bench of the Tribunal (40 SOT 432) allowed the claim. On appeal by the department to the High Court, HELD dismissing the appeal:

Budget 2012: Five things NRIs want

Union Budget 2012-13|pre-budget news|NRI TDS

1. Make TDS less taxing Tax deduction at source (TDS) is perhaps one of the biggest pain points for a Non Resident Indian's (NRI) transactions. The budget could do well to address some of these issues:

> Introduce basic exemption limit for NRIs before TDS applies: While Resident Indians are charged TDS only when income exceeds a certain limit, no such provision exists for NRIs

I-T - Whether when bank purchases non-convertible debentures at discount and there is actual delivery, loss resulting from such transactions is speculative loss u/s 43(5) and not capital loss - NO, it's capital loss: Madras HC

CHENNAI, MAR 02, 2012: THE issue before the Bench is - Whether when the bank purchases non-convertible debentures at discount and there is actual delivery, the loss resulting from such transactions is speculative loss u/s 43(5) and not capital loss - Whether non-convertible debentures are neither commodity nor shares or stocks. And the verdict goes in favour of assessee.

Facts of the case

Useful tips to save Income Tax for the Financial Year (FY) 2011-112

Income from Salary:-Section 17 of the Income Tax (IT) Act is all about taxation under the head ‘salary’. In most of the cases, it is impossible for a salaried person to avoid tax on his income, except by way of deduction under chapter VI A of the IT Act.

However, there are ways that can help you minimise your total tax outgo if you plan accordingly.

Everyone waits for that time of the year when they receive that lump sum called bonus from their employer. However, bonus is fully taxable on receipt basis and is included in your gross salary for the year in which you receive it. Can you limit the tax outgo on your bonus? Yes.

CBDT’s decision to confine the effect of low tax effect Instruction to fresh appeals is contrary to the object of s. 268A & the National Litigation Policy

CIT vs. M/s Ranka & Ranka (Karnataka High Court)

The department filed an appeal in the year 2005, the tax effect of which was less than Rs. 10 lakhs. The High Court had to consider whether inspite of para 11 of CBDT’s Instruction No. 3 of 2011 dated 9.2.2011 which declared that that the bar on filing departmental appeals with tax effect of less than Rs. 10 lkahs would apply only to appeals filed after 9.2.2011, the Instruction could still be considered to be applicable to pending appeals. HELD by the High Court dismissing the appeal as non-maintainable:

Intra group mergers or amalgamations exempted and simplification in procedure under the Combination Regulations

Background
Competition Commission of India (CCI) had on, 11 May 2011, issued the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations) which deals with procedural aspects relating to Combination, exemption available to certain Combinations and pre-merger notification process. The Combination Regulations were brought into force from 1 June 2011.

Meaning of “General Reserves” for the purpose of deduction under section 36(1)(viii) restricted

Issue before the Income-tax Appellate Tribunal (ITAT)
 Whether the phrase “paid up capital and general reserves” should be defined as “Net worth” as considered under other laws?
Contentions of the taxpayer
 The words “paid up capital” and “general reserves” are inseparable and have to be read together and not as separate words carrying different meaning.
 Since the Act does not define these words, definition under other laws should be considered. The word “Net worth” as defined under the Companies Act, 1956 as sum of paid up capital and free reserve. “Free Reserves” means all reserves created out of profits and share premium but do not include reserves created out of revaluation of assets, write back of depreciation provisions and amalgamation.
 The word “the general reserves” is in plural and therefore covers more than one reserve which forms part of shareholders‟ funds.
 The Finance Minister in his 2007 budget speech in respect of proposing an amendment to the amount of deduction under section 36(1)(viii) has used the word “Net worth”. Finance Minister‟s speech can be relied upon to throw light on the object and purpose of a particular provision of the Finance Bill.
 Intent of the legislature should be considered while interpreting statues. Beneficial provisions should be liberally construed or interpreted.
 Word prefixed with “the” should be read with reference to the previous word used in an enactment.
 Taxpayer also relied upon definitions provided in the Compendium of Guidance Notes issued by the Institute of Chartered Accountants and in a book published by a subsidiary of the credit rating company CRISIL.
Contentions of the department
 General reserve should be a revenue reserve capable of distribution as dividend freely through the P&L account.
Facts
 Taxpayer is a housing finance company. The relevant year is assessment year 2006-07.
 The taxpayer claimed a deduction of Rs.14,79,41,734 under section 36(1)(viii) 1 of the Income-tax Act, 1961 („the Act‟) The aggregate amount carried to the Special Reserve stood at Rs.98,39,00,000 as on April 1, 2005. Therefore, the amount carried to Special Reserve as at the year-end was Rs.113,18,41,734 (i.e. Rs.98,39,00,000 plus Rs.14,79,41,734). The taxpayer claimed that amount carried to Special Reserve did not exceed twice the amount of paid up capital and general reserves.

High Court to consider whether Low Tax Effect Circular has retrospective effect

CIT vs. Virgo Marketing Pvt. Ltd (Supreme Court)

 

The Department filed an appeal u/s 260A in 2006 where the tax effect was less than Rs. 10 lakhs. The High Court, relying on Instruction No. 3/2011 Dated 9-2-2011 (which had been held to apply to pending appeals in CIT vs. Delhi Race Club Ltd) dismissed the appeal as not maintainable. The Department challenged the decision on the ground that para 11 of Instruction No. 3/2011 Dated 9-2-2011 made it clear that it would apply only to appeals filed on or after 9.2.2011. HELD by the Supreme Court:

Expenditure incurred on closure of business

Expenditure incurred on closure of business of manufacturing activity - since the assessee had been doing other business activity also, namely, 'trading' it could not be said that the assessee had closed its business. - HC

Commissioner of Income-tax Versus KJS India P. Ltd. - High Court

Time Limit for issuance of notice u/s 201

Assessee in default - Time limitation - issuance of notice u/s 201 after a period of 4 years - though there is no period of limitation prescribed for exercise of that power, still such a power must be exercised within reasonable time - HC

Commissioner of Income-tax (TDS), Chandigarh Versus H.M.T. Ltd. - High Court

Search and Survey – Rights and Duties

1. Search and Survey:-Power to carry out search under section 132 and survey under section 133A are important tools in the armoury of the Income–tax department for detecting and preventing tax evasion. Though the need to have such tools cannot be grudged, the department has to use it sparingly and in deserving cases and after complying with necessary guidelines and safeguards. A search is violation of personal privacy and rights of a citizen and its use should only be in rarest of rare cases.

2. Search and Seizure u/s 132

2.1 Meaning

‘Search’ means a thorough inspection of the building, place, vehicle, vessel, aircraft and of the person.

‘Seizure’ means taking possession under the authority of law.

2.2 Powers in exercise of search

The Income-tax Act gives very wide powers to an authorised officer to carry out the search and also to seize documents and unaccounted assets. The authorised officer has the power to:

1. To enter and search any building, place, etc. where he has reason to suspect that books of account, other documents, money, bullion, jewellery or other valuable article or thing representing undisclosed income is kept;
2. To break open the locks, where the keys thereof are not available;
3. To carry out personal search of the person who is suspected to have secreted some item as mentioned in a) above;
4. Seize the items as mentioned in a) above;
5. Place marks of identification and take extracts or copies of the books of account and other documents; and
6. Make a note or inventory of the valuables found during the search.

The authorised officer is also permitted to pass orders placing prohibition on the person in possession or control of the valuable article or thing from removing, parting with or otherwise dealing with such article or thing without prior permission. The authorised officer also has the right to demand the services of any Police officer or any officer of the Central Government.

2.2.1 With effect from 1st June, 2003, law has been amended by Finance Act, 2003, whereby the authorised officer cannot seize stock-in-trade of a business and he can only make a note of inventory of such stock-in-trade. Irrespective of nature of business and stock held for such business whether it is jewellery, bullion or any other valuable article or thing, if such material is held by person searched as stock-in-trade of his business, the same cannot be seized. Also, bar on seizure applies irrespective of whether the person searched is able to explain the source of acquisition of such stock; in common parlance, whether stock is disclosed or undisclosed is immaterial and the same cannot be seized in any circumstance. However, restriction on seizure of stock-in-trade applies only to valuables and not cash. Unaccounted cash, even if forming part of stock-in-trade of business for an assessee, say carrying on money
lending business, can be seized, if other conditions are
satisfied.

2.3 Circumstances in which search can be carried out

The powers of search can be exercised when the authorised officer has reason to believe that:

1. any person has omitted or failed to produce books of account or documents as required by any summons or notice issued,
2. any person to whom, when so summoned to produce the documents, etc., will not or would not produce books of account or documents,
3. any person is in possession of money, bullion, jewellery or other valuable article or thing representing, income or property which has not been disclosed or would not be disclosed for purposes of the Income-tax Act.

2.4 Who can authorise search

The authorisation to carry out the search can be given by the Director General, Director of Income Tax, Chief Commissioner of Income Tax and Commissioner of Income Tax only.

2.5 Authority who can execute and carry out search

However, the search warrant can be executed by a Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income Tax Officer and they can be authorised to carry out actual search and seizure.

2.6 Guidelines for seizure of jewellery and ornaments in course of search

The CBDT has vide instruction No. 1916 dated 11th May, 1994, issued guidelines for seizure of jewellery and ornaments in course of search. The said guidelines, which is reported in (1994) 120 Taxation (St.) 98, is reproduced below.

‘Instances of seizure of jewellery of small quantity in course of operations under section 132 have come to the notice of the Board. The question of a common approach to situations where search parties come across items of jewellery, has been examined by the Board and following guidelines are issued for strict compliance:–

i.            In the case of a wealth-tax assessee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return only need be seized.
ii.            In the case of a person not assessed to wealth-tax, gold jewellery and ornaments to the extent of 500 gms. per married lady, 250 gms. per unmarried lady and 100 gms. per male member of the family, need not be seized.
iii.            The authorised officer may, having regard to the status of the family and the custom and practices of the community to which the family belongs and other circumstances of the case, decide to exclude a larger quantity of jewellery and ornaments from seizure. This should be reported to the Director of Income-tax/Commissioner authorising the search at the time of furnishing the search report.
iv.            In all cases, a detailed inventory of the jewellery and ornaments found must be prepared to be used for assessment purposes.

These guidelines may please be brought to the notice of all the officers in your region.’

3. Power of Survey – Section 133A

3.1 Introduction

The powers under provisions of survey, though not very wide as powers of search, are wide enough to effectively detect evasion of tax on income earned. The preconditions which need to be satisfied by the Income Tax Authority before exercising the power of survey are limited.

3.2 Extent of powers of survey

An income-tax authority can exercise following powers during survey:

i.            To inspect books of account and other documents,
ii.            To place marks of identification on books of account or documents examined,
iii.            To make extracts or copies of books of account or documents,
iv.            To impound books of account or other documents. However, the same cannot be retained beyond ten working days without prior approval of Chief Commissioner of Income Tax or Director General,

Though the survey party can visit during survey only a place of business, but if the party surveyed states that any books or other things relating to business are kept at a place other than place of business, then power to visit and survey such place is also available to the officers carrying out survey.

3.3 Whether books, cash, valuables etc. can be seized or impounded during survey

By Finance Act, 2002, law has been amended to empower the Income-tax Authority to impound and retain in his custody books of account or other documents inspected by him during survey, after recording his reasons for doing so. However the power to impound is restricted to only books and documents and does not extend to cash, valuables and other assets found. Further, books of account and documents so impounded cannot be retained beyond ten working days without obtaining prior approval from Chief Commissioner of Income Tax or the Director General.

3.4 Presumption in respect of seized/found books of account, documents etc.

According to S. 292C of the Act, where any books of account , other documents, money, bullion, jewellery or other valuable articles are found in the possession of any person during a search, it is presumed that such documents etc belong to that person. This presumption is rebuttable.

This section has been amended retrospectively w.e.f. 1-6-2002 to provide that such presumption will also apply in respect of books of account, documents etc. in the possession or control of any person in the course of Survey operation u/s 133A. This presumption is also extended to books of account, documents etc. delivered to the requisition officer u/s 132A. This amendment is effective retrospectively from 1-10-1975.

3.5 Authority who can carry out survey

Provisions relating to survey have been amended by Finance Act, 2003 w.e.f. 1-6-2003. Earlier no prior approval or authorisation was needed to carry out a survey and an assessing officer could himself have carried out survey at place of business of his assessee without any authorisation from his superior officers. With effect from 1st June, 2003, an Assessing Officer or a Tax Recovery Officer or an Inspector of Income Tax or Assistant Director or an Deputy Director cannot carry out survey without obtaining prior approval from the Joint Commissioner or the Joint Director.

4. It is important to note that under neither the provisions of search nor of survey, there is power to arrest the assessee for offence, if any, of concealment of income.

5. Recording of statements u/ss 131 and 132(4)

The authorised officer has the right to examine on oath any person who is found to be in possession of books of account, etc. or valuable article or thing. A statement on oath may be used as evidence in any proceedings under the Act.

Recently a circular has been issued directing officers carrying out search to desist from recording confessional statements offering income in such statements. (F. No. 286/2/2003-IT [Inv] dt. 10-3-2003)

6. Charter of Rights and Duties of Persons searched

The following is the Charter of rights and duties of persons searched which has been reported in [1994] 208 ITR (St) 5.

6.1 Rights of the person searched

• To see the warrant of authorisation duly signed and sealed by the issuing authority.
• To verify the identity of each member of the search party before the start of the search and on conclusion of the search.
• To insist on personal search of ladies being taken only by a lady, with strict regard to decency.
• To have at least two respectable and independent residents of the locality as witnesses.
• A lady occupying an apartment being searched has a right to withdraw before the search party enters, if, according to custom, she does not appear in public.
• To call a medical practitioner in case of emergency.
• To allow the children to go to school, after checking their bags.
• To have the facility of having meals, etc., at the normal time.
• To inspect the seals placed on various receptacles, sealed in course of search and subsequently at the time of reopening of the seals.
• Every person who is examined under section 132(4) has a right to ensure that the facts so stated by him have been recorded correctly.
• To have a copy of the panchanama together with all the annexures.
• To have a copy of any statement that is used against him by the Department.
• To have inspection of the seized books of account, etc., or to take extracts therefrom in the presence of any of the authorised officers or any other person empowered by him.
• To make an application objecting to the approval given by the Commissioner of Income-tax for retention of books and documents beyond 180 days from the date of the seizure.

6.2 Duties of the person searched

• To allow free and unhindered ingress into the premises.
• To see the warrant of authorisation and put signature on the same.
• To identify all receptacles in which assets or books of account and documents are kept and to hand over keys to such receptacles to the authorised officer.
• To identify and explain the ownership of the assets, books of account and documents found in the premises.
• To identify every individual in the premises and to explain their relationship to the person being searched. He should not mislead by impersonation. If he cheats by pretending to be some other person or knowingly substitutes one person for another, it is an offence punishable under section 416 of the Indian Penal Code.
• Not to allow or encourage the entry of any unauthorised person into the premises.
• Not to remove any article from its place without notice or knowledge of the authorised officer. If he secretes or destroys any document with the intention of preventing the same from being produced or used as evidence before the court or public servant, he shall be punishable with imprisonment or fine or both, in accordance with section 204 of the Indian Penal Code.
• To answer all queries truthfully and to the best of his knowledge. He should not allow any third party to either interfere or prompt while his statement is being recorded by the authorised officer. In doing so, he should keep in mind that –
• If he refuses to answer a question on a subject relevant to the search operation, he shall be punishable with imprisonment of fine or both, under section 179 of the Indian Penal Code.
• Being legally bound by an oath or affirmation to state the truth, if he makes a false statement, he shall be punishable with imprisonment or fine or both under section 181 of the Indian Penal Code.
• Similarly, if he provides evidence which is false and which he knows or believes to be false, he is liable to be punished under section 191 of the Indian Penal Code.
• To affix his signature on the recorded statement, inventories and the panchanama.
• To ensure that peace is maintained throughout the duration of the search, and to co-operate with the search party in all respects so that the search action is concluded at the earliest and in a peaceful manner.
• Similar co-operation should be extended even after the search action is over, so as to enable the authorised officer to complete necessary follow-up investigations at the earliest.

7. Do’s and Don’ts for assessees

1. Return of income should be filed within the time limit prescribed.
2. Copies of returns of income filed should be properly documented. Though your tax representative may be having and maintaining complete tax records, it is necessary that a copy of income tax and wealth tax returns filed are kept at office premises and in case of individuals, it should also be maintained at residence for all family members.
3. Books of account are maintained properly and upto date.
4. You may be called upon to explain any document, loose papers, etc. found during search or survey. As such, care should be taken to maintain papers in proper manner.
5. Investments made in assets should be properly accounted and supporting evidence should be available to substantiate the investment made.
6. Ornaments belonging to different members of the family should be kept separately. It is advisable to keep lists of the ornaments of each person and also where the ornaments are kept. Valuation report of a jeweller can be obtained. Also Tax records substantiating such ownership should be available at residence.
7. Statement recorded at the time of search are very crucial. The person making statement is advised to state truly, correctly, fully and completely. Reply should not be vague or evasive. One should be very cautious and careful while answering the question and the person should not panic.
8. Further, necessary co-operation should be made with the authorised officers. As per amendment made by the Finance Act, 2002, if a person who is required to afford the authorised officer the necessary facility to inspect the books of account or other documents maintained in electronic form, fails to afford such facility to the authorised officer, he shall be punishable with rigorous imprisonment for a term which may extend to two years and shall also be liable to fine.

Income Tax Provisions in Respect of Filing of Annual Information Return (AIR)

1. Section 285BA:- Section 285BA has been substituted by the Finance Act, 2004 w.e.f. 1-4-2005. It is applicable in respect of transactions registered or recorded during any financial year commencing on or after 1-4-2004. Sub-section (1) of section 285BA requires certain specified persons to furnish Annual Information Return (AIR) in respect of specified financial transactions registered or recorded by them during the financial year.

Under sub-section (2) of section 285BA AIR has to be furnished within the prescribed time, in the prescribed form and manner.

Law on Taxability of Gifts under the Income Tax Provisions

Generally, gifts received are not regarded as Income chargeable to Tax. However, by virtue of section 2(24)(xiii) r.w.s. 56(2)(v)  after 1-9-2004, any sum of money exceeding Rs. 25,000 (Rs. 50,000 in respect of gifts received in or after 1.4.2006), received without consideration by an individual or an HUF from any person is chargeable to tax as Income under the head Other Sources, subject to following exceptions: [(a) Receipts from certain relatives; as defined in the section]. (Refer Chart) [(b) Receipts on occasion of marriage of the individual.] [(c) Receipts under a will or inheritance.] [(d) Receipts in contemplation of death of the payer.]

Sec. 56(2)(v) has been amended by the Taxation Laws (Amendment) Act, 2006 so as to exempt also the receipts from (i) local authority, (ii) institutions exempt u/s. 10(23C); and (iii) trusts/institutions registered u/s. 12AA.

Sec. 56(2) has been further amended and w.e.f. 1-10-2009, the scope of gift is increased by adding immovable property or any property besides sum of money [S. 56(2)(vii)] excluding stock-in-trade, raw material, consumable stores or any other trading assets as under :

List of Property –

I-T - Whether expression 'any other person' in Sec 269 excludes Directors of assessee company which accepts loans or deposits - NO; Penalty upheld: HC

 THE issues before the HC are - Whether provisions of Sec 269SS do not get attracted when the deposits are in the nature of share application money; Whether the expression 'any other person' in Sec 269 excludes the Directors of the assessee company which accepts the loans or deposits and whether relief u/s 273B is available to the assessee only if it establishes the presence of reasonable cause for accepting the payment not by account payee cheque. And the verdict goes against the assessee.

Facts of the case

Concern expressed at “mutual acrimony” between Members of Chandigarh Bench

D.K.Srivastava vs. UOI & Ors (Central Administrative Tribunal)

The Applicant, an Accountant Member of the Tribunal, was transferred from Chandigarh to Rajkot. He challenged the transfer on the ground that it was punitive and had arisen because of a complaint against him by a Judicial Member. It was alleged that the Sr. VP, who decided the complaint, had indicted him without a hearing and that the said VP was part of the Collegium which had recommended the transfer. In turn, the Judicial Member alleged that she had been subjected to harassment by the Applicant and other Members of the Chandigarh Bench. She claimed that she had heard a bunch of appeals with the Applicant and that though she had drafted the judgement, the Applicant did not sign it till he sat on another Bench and decided another bunch of appeals by taking a contrary view to the view taken by her. She claimed that the Applicant had “purposely” kept the draft judgement in abeyance in order to be able to take a different view in another Bench while the Applicant alleged that there was something “extra judicial in her mind“. HELD by the CAT, dismissing the application:

S. 50C does not apply to transfer of tenancy/ leasehold rights

DCIT vs. Tejinder Singh (ITAT Kolkota) 

The assessee held lease hold rights for 99 years in a house property. By a tripartite agreement, the owner sold his rights in the property while the assessee assigned his leasehold rights. The assessee received Rs. 3.19 crores. The AO held that as the stamp duty valuation of the said property was higher than the agreed consideration, s. 50C applied and the assessee was assessable on the basis of the stamp duty valuation. This was reversed by the CIT (A) on the ground that s. 50C did not apply to leasehold rights. On appeal by the department to the Tribunal, HELD dismissing the appeal:

How to get Errors and Omissions in form 26AS rectified

What are the conditions under which advance tax/self assessment tax paid in the bank may not reflected in Part C of Form 26AS.
This could be because:
a) your PAN was not properly quoted in the tax payment challans or
b) the bank has made error in entering the PAN while digitizing the challan data or
c) the bank has failed to upload the digitized information to TIN.
You can use the challan status enquiry facility provided at TIN website to verify whether a challan bearing the Challan Identification Number (CIN) given in the counterfoil available with you has been uploaded to TIN. If the PAN as seen in this uploaded data is not your PAN, you may take up with your Assessing Officer for rectification of PAN.

Service Tax – Export of Services

On a general note, if services are exported, there is no service tax liability. In other words, as per the principles of Service Tax, it can be levied only if service is provided or received or consumed inIndia.

Meaning of “Export of Taxable Service”

For the purpose of classifying a service as “Export of Service” for the purpose of exemption, taxable services under these rules are classified into the following categories:

The Indirect Tax Ombudsman Guidelines, 2011

The Guidelines are introduced with the objective of enabling the resolution of complaints relating to public grievances against the Customs, Central Excise and Service Tax Department and to facilitate the satisfaction or settlement of such complaints.

CHAPTER I

PRELIMINARY