Fwd: dice are thrown; odds in whose favour - probability of VP of ICAI - from Western India Regional Council

---------- Forwarded message ----------

From: Suneel Appaji FCA <appaji@appaji.com>
Date: Wed, Jan 30, 2013 at 12:27 PM
Subject: dice are thrown; odds in whose favour - probability of VP of ICAI - from Western India Regional Council
To:


Dear All

I have collected opinions from various quarters and submitting my analysis to you without bias

• Out of 11 candidates from west,  5 are new faces and thus am excluding them
• Out of balance 6, 3 are in 2nd term and 3 are in final term.
• Adukia,  Sanjeev Maheshwari & Pankaj Jain are in final term / Nilesh, Dhinal & Zaware are in Second term
• It is expected that all the 6 will try their luck

Pankaj Jain

• Am told, he is too frank, too straight forward and too blunt
• How can I expect the political personalities vote to such a person and therefore feel he may not get elected to VP position
• However, he has a chance if second, third preferences are in his favour and in fray till those are counted, subject to my comments elsewhere

Nilesh

• Is a Gujarati - if anti Marwadi forces join hands, this factor helps
• Is related to previous President, Kamlesh
• Is considered to be in the team opposite of Subodh
• Is part of MAFIA and thus other MAFIA'ns should support
• Non controversial
• Unlike most of the other Council members is an expert in Accountants & audit - am sure this can be added advantage because in politics subject knowledge is never a factor
• Am told believes in process in every matter - when the Council is known for violation of every process, even this factor is negative for the voters

Dhinal

• Is from MAFIA - one of the Big Four
• Is a Gujarati
• Tech savoy

Zaware

• Am sure, is the senior most in age
• Prefers to be in the Council for 1 more term, to protect his business interests
• may contest for namesake

Sanjeev Maheshwari

• Close to Subodh
• Non-controversial
• Acceptable to most of the voters
• He is a Marwadi 
• You will generally here from him - "there are 2 sides of a coin" 
• Many analysts are zeroing on this man

Adukia

• Senior most Council member
• Shares Knowledge with members ( few critics say not his own knowledge but even if the knowledge is not his original, after all he shares is a great virtue is my answer)
• In ICAI politics from 1992, if my memory is right i.e spent more than 2/3 of his professional life as elected member in RC & CC
• Is a Marwadi and that too Agarwal. In the newly constituted Council, if these factors work, he should get quota at the first count itself - adukiaji please insist for open counting and declaring the transfer of votes etc
• Most of the members in Hyderabad told me they will give first preference to Adukia and second to me in the just concluded central council elections.....am sure he can get elected to Council by contesting from any of the regions
•  Finally, if not made President in this term, will come back to Council after a gap is worry of many Council members & Council aspirants is why they want Adukia to be President in this term so that in his life he will not come to Council again

 

Note:  - Our JV,  from South, that too from Hyderabad may kill aspirations & chances of these above persons is my gut feeling as JV is desperate in becoming VP this year and JV's aspirations and chances are in the hands of Devanna & Babu

The above opinions are collected from various members and put in at one place by me

Will email about other regions,after collecting data & info

--
Suneel Kumar Appaji FCA

Knowledge Architect & Management Adviser

99893 10302, 90147 10302

Specified Domestic Transactions- Transfer Pricing

---------- Forwarded message ----------
From: Nandkishore Hegde <hegdenandkishore@yahoo.com>
Date: Sat, Jan 26, 2013 at 12:29 PM

 

Dear Colleagues,

 

Wishing you a very happy Republic Day.

 

Rajubhai has always been wanting me to produce a simple document which lists down the basics that one needs to keep in mind in regard to transfer pricing for domestic transactions. My colleague Rakesh Alshi has been kind enough to forward a note that puts down the gist of the regulations in a simple format.

 

I am sure you will find this useful. I am not sending this as an attachment as some of you have complained of your not being able to view the earlier attachements.

 

Best regards

NC Hegde

 

 

 

 

 

 

Transfer Pricing - Specified Domestic Transactions

 

With the Finance Act, 2012 casting its net wider to include domestic transactions between related parties, within transfer pricing regulations, more organizations and transactions will be impacted. This note  provides a brief perspective on the extension of transfer pricing regulations to specified domestic transactions.

 

Specified Domestic Transactions

 

Till very recently, the transfer pricing regulations introduced in India in 2001 covered only cross border related party transactions. The Finance Act 2012, however, has extended its scope to cover even transactions between related parties in India, defined as specified domestic transactions.

 

This will have a two-fold impact. Firstly, the pricing of domestic transactions will need to comply with the Arm's Length
Principle by application of one of the prescribed methods. Additionally, there will be compliance and documentation obligations for such specified domestic transactions.

 

A synopsis of the regulation has been explained below.

 

Regulation

 

1.                    What are the transactions that would be considered as specified domestic transactions?

 

The following transactions, with an aggregate value exceeding INR 50 million, (approximately close to US$1 million) are covered:

·         expenditure for which payment is made or to be made to specified domestic related parties as mentioned in Sec 40A(2)(b).

·         transfer of goods or services to/from eligible business (tax holiday undertaking) from/to other businesses (non-tax holiday undertaking).

·         business transactions between eligible business (tax holiday unit) and other person(s) producing more than ordinary profits owing to close connection.

·          any other transactions as may be prescribed.

 

2.                    Which tax payers are covered under specified domestic transactions?

 

Any taxpayer incurring any expenditure with specified domestic related parties are required to comply with the regulations.

 

3.                    How do you define a specified domestic related party?

 

A specified domestic related party for a company may be defined as:

·         a director of the company.

·         a relative of the director.

·         a person who has substantial interest (carrying not less than 20% of the voting power) in the company and

·         fellow related parties where a single person has substantial interest in the two tax payers.

 

Any tax payer incurring any expenditure for which deduction can be claimed with specified domestic related parties is required to comply with the regulations.

 

4.                    Which other tax payers are covered under specified domestic transactions?

 

Tax payers enjoying tax holiday benefits are covered as under:

 

Location based tax holidays

·         Undertakings having a unit in a special economic zone - Sec 10AA

·         Undertakings located in industrially backward districts (e.g. Jaisalmer in Rajasthan, Bhojpur in Bihar, etc.) - Sec 80-IB

·         Undertakings located in Himachal Pradesh, Uttaranchal, or notified areas in North Eastern States (Assam, Tripura, etc.) - Sec 80-IC

·         Undertakings engaged in the hotel/ convention center industry   in specified areas/ districts - Sec 80-ID

 

 

 

 

Sector based tax  

·         Generation/transmission or distribution of power or holidays developing, operating, maintaining of infrastructure facilities, etc. - Sec 80-IA

·         Company/companies engaged in refining oil, under-takings engaged in developing and building housing projects, etc. - Sec 80-IB

 

5.                    Highlight a few illustrative examples of a transaction with a related party.

 

A few examples are:

·         normal operating business transactions, e.g., purchase/sale of goods and services, interest, etc.

·         payment of remuneration to directors,

·         allocation of common cost within the group entities.

 

6.                    What is the effective date for application of the proposed regulation?

 

·         It will be applicable to all transactions entered into with effect from 1 April 2012.

 

Compliance requirements

 

7.                    What are the compliance requirements for tax payers that have specified domestic transactions?

 

Tax payers that have specified domestic transactions should comply with the following:

 

·          maintain requisite information and documents as prescribed.

·          obtain and furnish a prescribed report from an Accountant in Form 3CEB.

 

8.                    What is the due date for filing the Accountant's report and documentation?

 

·         The Accountant's report needs to be submitted with the tax authorities by the due date of filing annual return of income. At present, the due date is 30 November.

·         Documentation is not required to be submitted along with the Accountant's report, but should be in place by the due date. It does need to be submitted during the course of the audit/assessment.

 

Documentation

 

9.                    Is there any prescribed list of documentation to be maintained?

The documentation would mainly include the following:

·         ownership structure and group profile.

·         industry and business analysis.

·         Functions, Assets and Risks analysis. (FAR analysis)

·         selection and application of most appropriate method.

·         comparability analysis

·         determination of arm's length price.

 

Economic Analysis - Comparables Search

 

10.          How can the search for potential comparables be conducted?
                                

Apart from internal data available external comparables may be searched on the basis of information available on websites, industry magazines and databases including Prowess and Capitaline.

 

Methods for determining Arm's Length Price

 

11.                 Are there prescribed methods to determine arm's length price?

            The arm's length price has to be determined by applying any of the following methods:

·         Comparable Uncontrolled Price Method (CUP)

·         Resale Price Method (RPM) •  Cost Plus Method (C+)

·         Profit Split Method (PSM)

·         Transactional Net Margin Method (TNMM)

·         Any other method as prescribed by the Central Board of Direct Taxes

 

Assessment/Audit

 

12.                 Who will be assessing the specified domestic transactions?

A separate cell consisting of transfer pricing officers will now assess these transactions in place of the assessing officers.

 

13.                 What is the statute of limitation for completion of the assessment?

 

The time limit for completion of assessment is extended to 48 months (as against 36 months currently) from the end of the relevant tax year.

 

Penal Consequences

 

14.                 What is the penalty for non-compliance with the regulations?

A stringent penalty regime has been prescribed:

·         failure to maintain documents - 2%   of the value of the transaction.

·         failure to furnish documents - 2%of the value of the transaction.

·         failure to report a transaction in Accountant's report - 2% of the value of the transaction.

·         maintaining or furnishing incorrect information or documents - 2% of the value of the transaction.

·         adjustment for incorrect pricing - 100% to 300% of the additional tax payable.

 

Next steps

 

15.                 How can one prepare for the regulations?

 

It will be necessary to identify and map the transactions which could be covered under the expanded scope of transfer pricing regulations. Such identified transactions are to be analyzed so as to comply with the arm's length principle based on the application of the most appropriate method and adequately supported by a robust economic analysis.   Tax payers would be better prepared to conduct the analysis either before the transaction or when the transaction is taking place

 during the particular financial year and not wait till the end of the financial year

Taxability of Revocable Transfer As Deemed Gift u/section 4(1)(c) of Gift-tax Act: Supreme Court Remands To High Court

 

Dear Subscriber,

 

The following important judgement is available for download at itatonline.org.

Satya Nand Munjal vs. CGT (Supreme Court)

Taxability of a revocable transfer as deemed gift u/s 4(1)(c) of the Gift-tax Act

 

The assessee owned 6000 shares of Hero Cycles. On 20.02.1982, he executed a deed of revocable transfer in favour of M/s Yogesh Chandra. The deed permitted the assessee to, after completion of 74 months from the date of transfer but before the expiry of 82 months from the said date, exercise the power of revoking the gift. In other words, there was a window of 8 months within which the gift could be revoked. The deed of revocable transfer specifically stated that the gift shall not include any bonus shares or right shares received and/or accruing or coming to the transferee from Hero Cycles by virtue of ownership of the said shares. Effectively, therefore, only a gift of 6000 equity shares was made by the assessee to the transferee. On 29.09.1982 & 31.5.1986, the company issued 4000 and 10,000 bonus shares to the transferee. On 15.6.1988, the assessee revoked the gift with the result that the 6000 shares gifted to the transferee came back to the assessee. However, the 14,000 bonus shares allotted to the transferee while it was the holder of the equity shares of the company continued with the transferee. In AY 1982-83, the GTO relied on McDowell 154 ITR 148 (SC) and held that the revocable transfer was only for the purpose of reducing the wealth tax liability and was void. He, however, made a protective gift-tax assessment. The Tribunal and the High Court (CGT vs. Satya Nand Munjal 256 ITR 516 (P&H)) reversed the AO and held that a revocable transfer was valid even if its object was to avoid wealth-tax. The assessee was held liable to pay gift-tax u/r 11 of the Gift-tax Act. In AY 1989-90 the AO & CIT(A) held that the 14,000 shares belonged to the assessee and as the revocation was only with respect to the 6,000 shares and the 14,000 bonus shares continued with the transferee, there was a chargeable gift to that extent. The Tribunal reversed the AO & CIT(A). On appeal by the department, the High Court reversed the Tribunal and held that the assessee was liable to gift tax on the value of the bonus shares gifted by him to the transferee applying the principles of Escorts Farms (Ramgarh) 222 ITR 509 (SC). On appeal by the assessee to the Supreme Court, HELD:

 

The fundamental question is whether there was in fact a gift of 14,000 bonus shares made by the assessee to the transferee. The answer to this question lies in s. 4(1)(c) of the Gift-tax Act which provides that "where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge, surrender, forfeiture or abandonment to the extent to which it has not been found to the satisfaction of the AO to have been bona fide, shall be deemed to be a gift made by the person responsible for the release, discharge, surrender, forfeiture or abandonment". On facts, the assessee had made a valid revocable gift of 6000 equity shares in the company on 20.2.1982 to the transferee. The only event that took place in AY 1989-90 was the revocation of the gift by the assessee on 15.6.1988. The question whether the revocation of the gift of the original shares in AY 1989-90 constitutes a gift of the bonus shares that were allotted to the transferee on 29.09.1982 and 31.05.1986 requires to be answered in the light of s.4(1)(c). The question of applicability of Escorts Farms has to be decided after a finding is reached on the applicability of the first part of s. 4(1)(c) (matter remanded).

(Click Here To Read More)

Regards,

Editor,

itatonline.org

---------------------

Latest:

Complex Tax Laws & Hostile Tax Dept Are Responsible For Tax Avoidance: Justice Swatanter Kumar

Section 271(1)(c) Penalty: High Court Takes Strict View

---------- Forwarded message ----------

From: editor@itatonline.org <itatonline.org@gmail.com>
Date: Tue, Jan 29, 2013 at 10:23 AM

 

Dear Subscriber,

 

The following important judgement is available for download at itatonline.org.

CIT vs. MAK Data Ltd (Delhi High Court)

S. 271(1)(c): Surrender of income without explanation attracts penalty

 

A survey u/s 133A was conducted on the assessee's premises in the course of which certain documents belonged to certain entities who had applied for shares in the assessee company were found. The AO called upon the assessee to prove the nature and source of the monies received as share capital, the creditworthiness of the applicants and the genuineness of the transactions. The assessee offered Rs. 40.74 lakhs as income from other sources "to avoid litigation and to buy peace". It was made clear that in making the surrender, there was no admission of concealment. The AO completed the assessment by adding the said sum and levied penalty u/s 271(1)(c) for furnishing inaccurate particulars of income u/s 271(1)(c). This was upheld by the CIT(A) though reversed by the Tribunal (included in file) on the ground that there was no material to show any concealment and even in the penalty order it was not specified as to the particular credit in respect of which the penalty was being imposed. It was also emphasized by the Tribunal that the assessee had made it clear while surrendering that there was no admission of concealment and that the offer was made in a spirit of settlement. On appeal by the Department to the High Court, HELD reversing the Tribunal:

 

When the AO called upon the assessee to produce evidence as to the nature and source of the amount received as share capital, the creditworthiness of the applicants and the genuineness of the transactions the assessee simply folded up and surrendered the sum of Rs. 40.74 lakhs by merely stating that it wanted to "buy peace". In the absence of any explanation in respect of the surrendered income, the first part of clause (A) of Explanation 1 to s. 271(1)(c) is attracted because the nature and source of the amount surrendered are facts material to the computation of total income. The absence of any explanation regarding the receipt of the money, which is in the exclusive knowledge of the assessee leads to an adverse inference against the assessee and is statutorily considered as amounting to concealment of income under the first part of clause (A) of the Explanation to s. 271(1)(c) and penalty has to be levied.

 

Contrast with Suresh Chandra Mittal 241 ITR 124 (MP) (affirmed in 251 ITR 9 (SC) that an offer to "buy peace" may be bona fide. See also article1 and article2 where the issue is discussed in detail

(Click Here To Read More)

Regards,

Editor,

itatonline.org

---------------------

Latest:

Satya Nand Munjal vs. CGT (Supreme Court)

Taxability of a revocable transfer as deemed gift u/s 4(1)(c) of the Gift-tax Act

Increase in advance limit of branches of PSU Bank to be audited for FY 2012-13

News about Bank Branch Audit (PSU) for Fy 2012-13

Today past presidenent ICAI CA.Amarjit Chopra informed that,

List of various firms to be allotted statutory branch auditors by banks has been forwarded to banks by RBI yesterday with threshold limit as 20 crores.Number of branch audits to come down drastically

Further, I've talk to couple of Council members in this regard. They have also confirmed this news.

The news was known to Council members before 20 days. However, we became aware about this only because of communication from CA.Amarjit Chopra.

It was learnt that, the matter is went too much ahead now, as the list were already forwarded by RBI.

The Council members are trying to reduce the limit as it was successfully done last year.

However, this time its too much late and there are very less possibilities to change/reverse this decision.

Regards,
-------
CA.C.V.PAWAR

0253-2319641. M-9423961209

ITR VOL 350 PART 4 AND ITR (TRIB) VOL 21 PART 4

 

INCOME TAX REPORTS (ITR)

Volume 350 Part 4 (Issue dated 28-1-2013)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

SUPREME COURT

Exemption --Charitable purpose--Assessee-trust receiving donation by cheque before end of accounting year--Cheque bearing date falling after end of accounting year and encashed thereafter--Assessee in balance sheet for accounting year showing sum as receivable in future and company not claiming advantage on account of donation in accounting year--No violation of provisions disqualifying assessee for exemption--That trustees and directors of donor-company related not material--Income-tax Act, 1961, ss. 11, 12, 13(2)(b), (d), (h)-- DIT (Exemption) v . Raunaq Education Foundation
. . . 420

HIGH COURTS

Accounting --Hire-purchase agreement--Indexing system followed by assessee--Mercantile system followed for purposes of assessment--Not justified--Income-tax Act, 1961, s. 145-- Chakra Financial Services Ltd . v . CIT (AP) . . . 396

Appeal to Appellate Tribunal --Duty of Tribunal to give its own reason--Income-tax Act, 1961-- Abhyudaya Pharmaceuticals v . CIT (All) . . . 358

Appeal to Commissioner (Appeals) --Appeal can be made only by assessee--Assessee cannot withdraw appeal--Rejection of application for settlement on ground that appeal had been withdrawn--Not valid--Income-tax Act, 1961, ss. 245C, 251-- M. Loganathan v. ITO (Mad) . . . 373

Appeal to High Court --Competency of appeal--Effect of Instruction No. 3 of 2011 issued by CBDT--No appeal if tax effect is less than ten lakhs of rupees--Instruction applicable to pending proceedings--Appeal not having cascading effect--Appeal not maintainable--CBDT Instruction No. 3 of 2011, dated 9-2-2011--Income-tax Act, 1961, s. 260A-- CIT v . Smt. Varsha Dilip Kolhe (Bom) . . . 384

Auditing of accounts --Direction for special audit--Conditions precedent--Complexity of accounts and safeguarding interests of Revenue--Conditions cumulative--Statutory authority maintaining books of account in accordance with law--Books of account not examined--No evidence that accounts were complex--Notice on basis of notes of accounts--Not valid--Income-tax Act, 1961, s. 142(2A)-- Delhi Development Authority v. Union of India (Delhi) . . . 432

Business expenditure --Capital or revenue expenditure--Repairs and renovation of leased business premises--Revenue expenditure--Income-tax Act, 1961, s. 37-- Thiru Arooran Sugars Ltd . v. Deputy CIT (Mad) . . . 324

----Deduction only on actual payment--Provident fund and ESI contributions made before filing return--Allowable--Income-tax Act, 1961, ss. 36(1)(va), 43B-- CIT v. Nipso Polyfabriks Ltd. (HP) . . . 327

Cash credits --Firm--Capital introduced by partner after commencement of business--Dispute regarding source of contribution--Unexplained cash credit cannot be added in hands of firm--Income-tax Act, 1961, s. 68-- Abhyudaya Pharmaceuticals v. CIT (All) . . . 358

----Share application money--Assessing Officer--Powers--Power to seek information from assessee as to creditworthiness of share applicants--Power to seek information as to sources of share applicants--Income-tax Act, 1961, s. 68-- CIT v . Nipun Builders and Developers Pvt. Ltd. (Delhi) . . . 407

----Share application money--Creditworthiness of share applicants--Burden of proof--No need of in-depth particulars and details about resources of share applicants--Prima facie satisfaction about creditworthiness of applicants--Mere furnishing of bank statements of share applicants--Not sufficient to prove creditworthiness--Income-tax Act, 1961, s. 68-- CIT v . Nipun Builders and Developers Pvt. Ltd.
(Delhi) . . . 407

----Share application money--Genuineness of transactions--Reassessment--Report from Intelligence Wing that share capital represented accommodation entries--Failure to furnish report does not affect validity of addition--Income-tax Act, 1961, ss. 68, 147-- CIT v . Nipun Builders and Developers Pvt. Ltd. (Delhi) . . . 407

----Share application money--Genuineness of transactions--Summons to share applicants--Burden of proof--No onus on Assessing Officer to visit website for addresses of share applicants for verification--Onus on assessee to prove genuineness--Income-tax Act, 1961, ss. 68, 131-- CIT v . Nipun Builders and Developers Pvt. Ltd.
(Delhi) . . . 407

Deduction of tax at source --Lorry booking business--Assessee collecting freight charges from clients who intended to transport their goods through separate transporters--Assessee paying to transporters entire amount collected from clients after deducting his commission--No privity of contract of carriage of goods between assessee and his clients--Assessee not a person responsible but only a facilitator--Tax not deductible at source--Income-tax Act, 1961, s. 194C-- CIT v. Hardarshan Singh
(Delhi) . . . 427

Industrial undertaking --Special deduction under sections 80HH and 80-IA--Computation of special deduction--Determination of business profits--Expenditure directly related to industrial units deductible--Research and development expenses of head office--No evidence to show nexus with business of branches--Allocation of such expenses among branch units by Assessing Officer not justified--Income-tax Act, 1961, ss. 80HH, 80-I-- Zandu Pharmaceuticals Works Ltd. v . CIT (Bom) . . . 366

Precedent --Effect of decision of Supreme Court in CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443 (SC)-- M. Loganathan v. ITO (Mad) . . . 373

----Effect of decision of Supreme Court in Sanjeev Woolen Mills v. CIT [2005] 279 ITR 434--C hakra Financial Services Ltd. v. CIT (AP) . . . 396

Recovery of tax --Stay of proceedings--Assessee enjoying exemption as a charitable institution for fifty years till assessment year 2009-10--Assessment denying exemption--Recovery proceedings initiated--Rejection of application for stay of proceedings--Not justified--Income-tax Act, 1961, s. 220(6)-- Rajasthani Sammelan Sarvoday Balika Vidyalaya v . Asst. DIT (Exemption) (Bom) . . . 349

Search and seizure --Requisition--Conditions precedent for application of section 132A--Material to show assets or cash seized would not have been disclosed to income-tax authorities--Cash seized by police authorities--Reasonable explanation regarding cash--No evidence that amount would not be disclosed to income-tax authorities--Order of requisition--Not valid--Income-tax Act, 1961, s. 132A-- Prakash Jaichand Shah v . DIT (Investigations) (Guj) . . . 336

Trading or investment --Purchase of units of mutual funds and sale thereof after realisation of dividend at a loss--Whether in course of business--General principles--Intention of parties relevant--Matter remanded-- CIT v. Allu Arvind Babu
(Mad) . . . 387

Wealth-tax --Surplus of income--Presumption--Exception--No presumption could be drawn after lapse of long period--Addition of income from undisclosed sources in assessment years 1963-64 to 1970-71--Not to be treated as surplus available in assessee’s hands to be treated as wealth for purpose of wealth-tax for years 1985-86 to 1988-89--Wealth-tax Act, 1957-- Gyan Chand Jain v . CWT (Jharkhand) . . . 353

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 11 --Exemption--Charitable purpose--Assessee-trust receiving donation by cheque before end of accounting year--Cheque bearing date falling after end of accounting year and encashed thereafter--Assessee in balance sheet for accounting year showing sum as receivable in future and company not claiming advantage on account of donation in accounting year--No violation of provisions disqualifying assessee for exemption--That trustees and directors of donor-company related not material-- DIT (Exemption) v. Raunaq Education Foundation (SC) . . . 420

S. 12 --Exemption--Charitable purpose--Assessee-trust receiving donation by cheque before end of accounting year--Cheque bearing date falling after end of accounting year and encashed thereafter--Assessee in balance sheet for accounting year showing sum as receivable in future and company not claiming advantage on account of donation in accounting year--No violation of provisions disqualifying assessee for exemption--That trustees and directors of donor-company related not material-- DIT (Exemption) v. Raunaq Education Foundation (SC) . . . 420

S. 13(2)(b), (d), (h) --Exemption--Charitable purpose--Assessee-trust receiving donation by cheque before end of accounting year--Cheque bearing date falling after end of accounting year and encashed thereafter--Assessee in balance sheet for accounting year showing sum as receivable in future and company not claiming advantage on account of donation in accounting year--No violation of provisions disqualifying assessee for exemption--That trustees and directors of donor-company related not material-- DIT (Exemption) v. Raunaq Education Foundation (SC) . . . 420

S. 36(1)(va) --Business expenditure--Deduction only on actual payment--Provident fund and ESI contributions made before filing return--Allowable-- CIT v. Nipso Polyfabriks Ltd. (HP) . . . 327

S. 37 --Business expenditure--Capital or revenue expenditure--Repairs and renovation of leased business premises--Revenue expenditure-- Thiru Arooran Sugars Ltd . v. Deputy CIT (Mad) . . . 324

S. 43B --Business expenditure--Deduction only on actual payment--Provident fund and ESI contributions made before filing return--Allowable-- CIT v. Nipso Polyfabriks Ltd. (HP) . . . 327

S. 68 --Cash credits--Firm--Capital introduced by partner after commencement of business--Dispute regarding source of contribution--Unexplained cash credit cannot be added in hands of firm-- Abhyudaya Pharmaceuticals v. CIT (All) . . . 358

----Cash credits--Share application money--Assessing Officer--Powers--Power to seek information from assessee as to creditworthiness of share applicants--Power to seek information as to sources of share applicants-- CIT v . Nipun Builders and Developers Pvt. Ltd. (Delhi) . . . 407

----Cash credits--Share application money--Creditworthiness of share applicants--Burden of proof--No need of in-depth particulars and details about resources of share applicants--Prima facie satisfaction about creditworthiness of applicants--Mere furnishing of bank statements of share applicants--Not sufficient to prove creditworthiness-- CIT v . Nipun Builders and Developers Pvt. Ltd. (Delhi) . . . 407

----Cash credits--Share application money--Genuineness of transactions--Reassessment--Report from Intelligence Wing that share capital represented accommodation entries--Failure to furnish report does not affect validity of addition-- CIT v . Nipun Builders and Developers Pvt. Ltd. (Delhi) . . . 407

----Cash credits--Share application money--Genuineness of transactions--Summons to share applicants--Burden of proof--No onus on Assessing Officer to visit website for addresses of share applicants for verification--Onus on assessee to prove genuineness-- CIT v . Nipun Builders and Developers Pvt. Ltd. (Delhi) . . . 407

S. 80HH --Industrial undertaking--Special deduction under sections 80HH and 80-IA--Computation of special deduction--Determination of business profits--Expenditure directly related to industrial units deductible--Research and development expenses of head office--No evidence to show nexus with business of branches--Allocation of such expenses among branch units by Assessing Officer not justified-- Zandu Pharmaceuticals Works Ltd. v . CIT (Bom) . . . 366

S. 80-I --Industrial undertaking--Special deduction under sections 80HH and 80-IA--Computation of special deduction--Determination of business profits--Expenditure directly related to industrial units deductible--Research and development expenses of head office--No evidence to show nexus with business of branches--Allocation of such expenses among branch units by Assessing Officer not justified-- Zandu Pharmaceuticals Works Ltd. v . CIT (Bom) . . . 366

S. 131 --Cash credits--Share application money--Genuineness of transactions--Summons to share applicants--Burden of proof--No onus on Assessing Officer to visit website for addresses of share applicants for verification--Onus on assessee to prove genuineness-- CIT v . Nipun Builders and Developers Pvt. Ltd. (Delhi) . . . 407

S. 132A --Search and seizure--Requisition--Conditions precedent for application of section 132A--Material to show assets or cash seized would not have been disclosed to income-tax authorities--Cash seized by police authorities--Reasonable explanation regarding cash--No evidence that amount would not be disclosed to income-tax authorities--Order of requisition--Not valid-- Prakash Jaichand Shah v . DIT (Investigations) (Guj) . . . 336

S. 142(2A) --Auditing of accounts--Direction for special audit--Conditions precedent--Complexity of accounts and safeguarding interests of Revenue--Conditions cumulative--Statutory authority maintaining books of account in accordance with law--Books of account not examined--No evidence that accounts were complex--Notice on basis of notes of accounts--Not valid-- Delhi Development Authority v . Union of India (Delhi) . . . 432

S. 145 --Accounting--Hire-purchase agreement--Indexing system followed by assessee--Mercantile system followed for purposes of assessment--Not justified-- Chakra Financial Services Ltd . v . CIT (AP) . . . 396

S. 147 --Cash credits--Share application money--Genuineness of transactions--Reassessment--Report from Intelligence Wing that share capital represented accommodation entries--Failure to furnish report does not affect validity of addition-- CIT v . Nipun Builders and Developers Pvt. Ltd. (Delhi) . . . 407

S. 194C --Deduction of tax at source--Lorry booking business--Assessee collecting freight charges from clients who intended to transport their goods through separate transporters--Assessee paying to transporters entire amount collected from clients after deducting his commission--No privity of contract of carriage between assessee and his clients--Assessee not a person responsible but only a facilitator--Tax not deductible at source-- CIT v. Hardarshan Singh (Delhi) . . . 427

S. 220(6) --Recovery of tax--Stay of proceedings--Assessee enjoying exemption as a charitable institution for fifty years till assessment year 2009-10--Assessment denying exemption--Recovery proceedings initiated--Rejection of application for stay of proceedings--Not justified-- Rajasthani Sammelan Sarvoday Balika Vidyalaya v . Asst. DIT (Exemption) (Bom) . . . 349

S. 245C --Appeal to Commissioner (Appeals)--Appeal can be made only by assessee--Assessee cannot withdraw appeal--Rejection of application for settlement on ground that appeal had been withdrawn--Not valid-- M. Loganathan v. ITO
(Mad) . . . 373

S. 251 --Appeal to Commissioner (Appeals)--Appeal can be made only by assessee--Assessee cannot withdraw appeal--Rejection of application for settlement on ground that appeal had been withdrawn--Not valid-- M. Loganathan v. ITO
(Mad) . . . 373

S. 260A --Appeal to High Court--Competency of appeal--Effect of Instruction No. 3 of 2011 issued by CBDT--No appeal if tax effect is less than ten lakhs of rupees--Instruction applicable to pending proceedings--Appeal not having cascading effect--Appeal not maintainable--CBDT Instruction No. 3 of 2011, dated 9-2-2011-- CIT v . Smt. Varsha Dilip Kolhe (Bom) . . . 384

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))

Volume 21 : Part 4 (Issue dated : 28-1-2013)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Advance tax --Interest--Income computed under section 115JB--Levy of interest mandatory--Income-tax Act, 1961, s. 234B-- Eastern India Powertech Ltd. v. Additional CIT (Delhi) . . . 542

Bad debt --Conditions for allowance--Law applicable--After 1-4-1989 not necessary to establish that debt had in fact become irrecoverable in previous year--Amount written off in accounts--Amounts treated as income in earlier years--Deductible--Income-tax Act, 1961, s. 36(2)-- HSBC Securities and Capital Markets (India) P. Ltd. v. Assistant CIT (Mumbai) . . . 445

Business expenditure --Deduction only on actual payment--Service tax--Amount paid before due date for filing return--Section 43B not applicable--No interference--Income-tax Act, 1961, s. 43B-- Deputy CIT v. Ovira Logistics P. Ltd. (Mumbai) . . . 436

----Disallowance--Failure to deduct tax at source on payment--Finding that no liability to deduct tax at source under section 194A--Section 40(a)(ia) not applicable--Mercantile system of accounting--Whether amount paid or whether or not recorded in books not material--Deduction cannot be denied--Income-tax Act, 1961, ss. 40(a)(ia) 194A-- Pranik Shipping and Services Ltd. v. Assistant CIT (Mumbai) . . . 489

----Interest on borrowed capital--Interest-free advances to sister-concern--Presumption that advances made from interest-free funds available with assessee--Interest allowable--Income-tax Act, 1961, s. 36(1)(iii)-- Pranik Shipping and Services Ltd. v. Assistant CIT (Mumbai) . . . 489

Capital gains --Capital asset--Transferable development rights--Amounts to transfer of capital asset--Such right not embedded in land--No detriment to cost of land by granting transfer of such rights--No element of cost in acquiring the right which had been transferred--Receipts on such transfer not taxable under capital gains--Income-tax Act, 1961, ss. 2(14), 48-- Land Breez Co-operative Housing Society Ltd. v. ITO (Mumbai) . . . 467

Capital or revenue expenditure --Expenditure on acquiring software--Principles to determine whether expenditure was of revenue nature--No finding regarding user of software--Matter remanded--Income-tax Act, 1961-- Deputy CIT (LTU) v. Honda Siel Cars Ltd. (Delhi) . . . 497

----Expenditure on maintenance of software--Revenue expenditure--Income-tax Act, 1961-- Deputy CIT v. Ovira Logistics P. Ltd. (Mumbai) . . . 436

----Licence fees for acquiring software for running computers--Revenue expenditure--Income-tax Act, 1961-- HSBC Securities and Capital Markets (India) P. Ltd. v. Assistant CIT (Mumbai) . . . 445

Company --Book profits--Computation--Provision for doubtful debts--Dispute as to tariff payable under power purchase agreement--Suit pending in court and matter referred to arbitration--Unascertained liability--To be added in computation of book profits--Income-tax Act, 1961, s. 115JB-- Eastern India Powertech Ltd. v. Additional CIT (Delhi) . . . 542

Deduction of tax at source --Company selling SIM cards and recharge coupons of Chennai Telephones to wholesale dealers at “discount†--†Discount†allowed on sale of recharge coupons --Not discount but commission--Tax deductible at source on such amount--Income-tax Act, 1961, ss. 194H, 201-- Cellular Mobile Telecom Services v. ITO (Chennai) . . . 456

International transaction --Determination of arm’s length price--Indian company providing call centre services for associated U. S. company--Guidelines for determination of arm’s length price--Matter remanded--Income-tax Act, 1961, s. 92C--24/7 Customer.Com.Pvt. Ltd. v. Deputy CIT (Bangalore) . . . 514

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 2(14) --Capital gains--Capital asset--Transferable development rights--Amounts to transfer of capital asset--Such right not embedded in land--No detriment to cost of land by granting transfer of such rights--No element of cost in acquiring the right which had been transferred--Receipts on such transfer not taxable under capital gains-- Land Breez Co-operative Housing Society Ltd. v. ITO (Mumbai) . . . 467

S. 36(1)(iii) --Business expenditure--Interest on borrowed capital--Interest-free advances to sister-concern--Presumption that advances made from interest-free funds available with assessee--Interest allowable-- Pranik Shipping and Services Ltd. v. Assistant CIT (Mumbai) . . . 489

S. 36(2) --Bad debt--Conditions for allowance--Law applicable--After 1-4-1989 not necessary to establish that debt had in fact become irrecoverable in previous year--Amount written off in accounts--Amounts treated as income in earlier years--Deductible-- HSBC Securities and Capital Markets (India) P. Ltd. v. Assistant CIT (Mumbai) . . . 445

S 40(a)(ia) --Business expenditure--Disallowance--Failure to deduct tax at source on payment--Finding that no liability to deduct tax at source under section 194A--Section 40(a)(ia) not applicable--Mercantile system of accounting--Whether amount paid or whether or not recorded in books not material--Deduction cannot be denied-- Pranik Shipping and Services Ltd. v. Assistant CIT (Mumbai) . . . 489

S. 43B --Business expenditure--Deduction only on actual payment--Service tax--Amount paid before due date for filing return--Section 43B not applicable--No interference-- Deputy CIT v. Ovira Logistics P. Ltd. (Mumbai) . . . 436

S. 48 --Capital gains--Capital asset--Transferable development rights--Amounts to transfer of capital asset--Such right not embedded in land--No detriment to cost of land by granting transfer of such rights--No element of cost in acquiring the right which had been transferred--Receipts on such transfer not taxable under capital gains-- Land Breez Co-operative Housing Society Ltd. v. ITO (Mumbai) . . . 467

S. 92C --International transaction--Determination of arm’s length price--Indian company providing call centre services for associated U. S. company--Guidelines for determination of arm’s length price--Matter remanded--24/7 Customer.Com.Pvt. Ltd. v. Deputy CIT (Bangalore) . . . 514

S. 115JB --Company--Book profits--Computation--Provision for doubtful debts--Dispute as to tariff payable under power purchase agreement--Suit pending in court and matter referred tot arbitration--Unascertained liability--To be added in computation of book profits-- Eastern India Powertech Ltd. v. Additional CIT (Delhi) . . . 542

S. 194A --Business expenditure--Disallowance--Failure to deduct tax at source on payment--Finding that no liability to deduct tax at source under section 194A--Section 40(a)(ia) not applicable--Mercantile system of accounting--Whether amount paid or whether or not recorded in books not material--Deduction cannot be denied-- Pranik Shipping and Services Ltd. v. Assistant CIT (Mumbai) . . . 489

S. 194H --Deduction of tax at source--Company selling SIM cards and recharge coupons of Chennai Telephones to wholesale dealers at “discount†--†Discount†allowed on sale of recharge coupons --Not discount but commission--Tax deductible at source on such amount-- Cellular Mobile Telecom Services v. ITO (Chennai) . . . 456

S. 201 --Deduction of tax at source--Company selling SIM cards and recharge coupons of Chennai Telephones to wholesale dealers at “discount†--†Discount†allowed on sale of recharge coupons --Not discount but commission--Tax deductible at source on such amount--Income-tax Act, 1961, ss. 194H, 201-- Cellular Mobile Telecom Services v. ITO (Chennai) . . . 456

S. 234B --Advance tax--Interest--Income computed under section 115JB--Levy of interest mandatory-- Eastern India Powertech Ltd. v. Additional CIT (Delhi) . . . 542

 

 

Section 50C Does Not Apply To Transfer Of FSI And TDR: ITAT Mumbai

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Dear Subscriber,

 

The following important judgement is available for download at itatonline.org.

ITO vs. Prem Rattan Gupta (ITAT Mumbai)

S. 50C does not apply to transfer of FSI & TDR

 

The assessee owned a plot of land admeasuring 2244.18 sq. mts of which 2110 sq. mts was acquired by the Municipality for development purposes. The assessee was entitled to receive TDR/ FSI in lieu of the land acquired. The assessee sold the development rights to the said property for Rs. 20 lakhs and computed capital gains on that basis. However, for purposes of stamp duty, the property was valued at Rs. 1.19 crores. The AO held that the value of the property as adopted by the stamp duty authorities had to be taken as the consideration u/s 50C for purposes of capital gains. This was reversed by the CIT(A). On appeal by the department to the Tribunal, HELD:

 

S. 50C applies only to the transfer of "land or building" and not to the transfer of all "immovable property". Accordingly, though FSI and TDR is "immovable property" as held in Chedda Housing Development vs. Babijan Shekh Farid 2007 (3) MLJ 402 (Bom), it is not "land or building" and so cannot be the subject matter of s. 50C. The property acquired for development (in lieu of which the FSI/TDR was granted) also cannot be considered even though the property continues to stand in the assessee's name in the property records. The property should be valued by the DVO net of the land transferred to the Developer by the assessee after considering the acquisition made by the Govt & the Municipal Corporation and also excluding the value of TDR or additional FSI included in the consideration shown in the Development Agreement

 

For more see Treatise on the law of Real Estate Development Contracts

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Irfan Abdul Kader Fazlani vs. ACIT (ITAT Mumbai)

S. 50C does not apply to transfer of immovable property held through company

Section 50C Does Not Apply To Transfer Of Immovable Property Held Through Company: ITAT Mumbai

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From: editor@itatonline.org <itatonline.org@gmail.com>
Date: Tue, Jan 22, 2013 at 12:00 PM
 

Dear Subscriber,

 

The following important judgement is available for download at itatonline.org.

Irfan Abdul Kader Fazlani vs. ACIT (ITAT Mumbai)

S. 50C does not apply to transfer of immovable property held through company

 

The assessee held shares in a company called Kamala Mansion Pvt. Ltd. The company owned flats in a building known as Om Vikas Apartments, Walkeshwar Road, Mumbai. The shares were sold by the assessee for Rs. 37.51 lakhs and capital gains were offered on that basis. The AO & CIT(A) held that by the sale of shares in the company, the assessee had effectively transferred the immovable property belonging to the assessee and that it was an indirect way of transferring the immovable properties being the flats in the building. He accordingly 'pierced the corporate veil', invoked s. 50C and computed the capital gains by adopting the stamp duty value of the flats. On appeal by the assessee to the Tribunal, HELD allowing the appeal:

 

S. 50C applies only to the transfer of a "capital asset, being land or building or both", "assessed" by any authority of a State Government for stamp duty purposes. The expression "transfer" has to be a direct transfer as defined u/s 2(47) which does not include the tax planning adopted by the assessee. S. 50C is a deeming provisions and has to be interpreted strictly in accordance with the spirit of the provision. On facts, the subject matter of transfer is shares in a company and not land or building or both. The assessee did not have full ownership on the flats which are owned by the company. The transfer of shares was never a part of the assessment of the Stamp duty Authorities of the State Government. Also, the company was deriving income which was taxable under the head 'income from property' for more than a decade. Consequently, the action of the AO & CIT(A) to invoke s. 50C to the tax planning adopted by the assessee is not proper and does not have the sanction of the provisions of the Act.

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Update: The Bombay High Court's order granting stay against coercive recovery in the CBEC Circular matter is now available

Regards,

How To Argue Matters Before The Tribunal: Shri. H. L. Karwa, President, ITAT

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Date: Mon, Jan 21, 2013 at 10:53 AM
 

Dear Subscriber,

How To Argue Matters Before The Tribunal: Shri. H. L. Karwa, President, ITAT

Shri. H. L. Karwa was a leading High Court Advocate before his elevation to the Bench. He uses his rich experience as an Advocate and as a Judge to pinpoint a few techniques that Lawyers & Chartered Accountants should adopt while arguing matters before the Tribunal so that they are able to convey their point more effectively to the Bench. He also sends the gentle reminder that more Professionals should join the Bench

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Dare To Dream Beyond Supreme Court. Get Ready For E-Supreme Court!!

Bombay High Court Also Grants Stay Against Coercive Recovery Pursuant To CBEC Circular

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Date: Thu, Jan 17, 2013 at 3:25 PM
 

Dear Subscriber,

CBEC Circular On Recovery Dated 01.01.2013 & Connected Legal Developments

The Bombay High Court today (17.01.2013) granted ad-interim stay against coercive recovery pursuant to Circular No. 967/01/ 2013 – CX dated 01.01.2013 issued by the Central Board of Excise and Customs. The orders were passed in the case of Uhde India Pvt. Ltd vs. UOI WP 380 of 2013, Exide Industries Ltd vs. UOI WP No. 381 of 2013 and connected matters. The Petitions are now listed for admission on 31.01.2013 to enable the Department to file a reply. The Andhra Pradesh High Court has already granted on 09.01.2013 a stay in the matter in the case of Ultratech Cement Ltd vs. UOI W.P. No. 736 of 2013.

The view that is taken by the High Courts in these matters will have considerable bearing in income-tax matters as well.

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Editor,

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Latest:

Vodafone West Ltd vs. ACIT (ITAT Ahmedabad)

S. 254(2A) Third Proviso: Tribunal has the power to grant unlimited stay of demand