ITR (TRIB) Volume 34 : Part 2 (Issue dated : 1-9-2014)

 

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))--PRINT AND ONLINE EDITION

 

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Export --Exemption--Communication expenses excluded from export turnover--To be excluded also from total turnover--Income-tax Act, 1961, s. 10A-- United Online Software Development (India) P. Ltd. v. ITO (Hyd) . . . 177

International transactions --Arm’s length price--Determination--Transactional net margin method--Software development services--Selection of comparables--Companies having turnover falling within particular range to be considered--Functionally different companies to be excluded from comparables--Matter remanded for decision afresh on giving assessee an opportunity of being heard--Income-tax Act, 1961, s. 92CA-- United Online Software Development (India) P. Ltd. v. ITO (Hyd) . . . 177

PRINT EDITION

Volume 34 : Part 2 (Issue dated : 1-9-2014)

SUBJECT INDEX TO CASES REPORTED

Advance-tax --Interest--No liability to pay interest for contracts where income taxable under section 44BB on presumptive basis--Assessee liable to pay interest in respect of contracts income from which arose in India--Income-tax Act, 1961, s. 234B-- Baker Hughes Asia Pacific Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 192

Charitable purpose --Registration of trust--Cancellation of registration--Commissioner discharging quasi-judicial duty--No mala fide intention--No award of costs warranted--Income-tax Act, 1961, s. 12AA-- Parkar Medical Foundation v. Deputy CIT (Pune) . . . 286

----Registration of trust--Cancellation of registration--Only on Commissioner’s satisfaction that activities of trust not genuine or not carried out in accordance with objects of trust--Income-tax Act, 1961, ss. 12A, 12AA-- Parkar Medical Foundation v. Deputy CIT (Pune) . . . 286

Income from undisclosed sources --Search and seizure--Bank pass-books and cheques of non-resident external account belonging to non-resident Indians found in assessee’s possession during search--Only foreign remittance permissible in non-resident external account--Additions in hands of resident assessee not valid--Income-tax Act, 1961-- Asst. CIT v. Mohammed Mohsin Rajabali Dosani (Ahd) . . . 271

----Seizure of loose sheet showing payment of amount to assessee--Payments not reflected in books of account--Assessee offering to adjust undisclosed income--No record to establish that payments were actually made to assessee--No addition can be made solely relying upon a single piece of paper unless there are enough corroborative evidence--Matter remanded--Income-tax Act, 1961-- Bhaskar Rao (B.) v. Deputy CIT (Hyd) . . . 277

Non-resident --Taxability in India--Income deemed to accrue or arise in India--Terms of contract revealing intention of party to appropriate goods in India--Parties intended for transfer of title in goods in India--Income accrued or arose in India--Matter remanded to Assessing Officer for attributing income out of contracts to extent of operations relating to sales carried out in India--Matter remanded--Income-tax Act, 1961, s. 5-- Baker Hughes Asia Pacific Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 192

----Taxability in India--Prospecting for, or extraction or production of, mineral oils--Section 44BB encompasses within its ambit all the services connected with oil exploration--Special provision prevails over all other provisions dealing with royalty or fees for technical services--Retrospective amendment not applicable as higher tax burden on assessee--Income to be assessed under section 44BB--Income-tax Act, 1961, s. 44BB-- Baker Hughes Asia Pacific Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 192

Penalty --Acceptance or repayment of deposits exceeding prescribed limit otherwise than by account payee cheque--Transactions between sister concerns by way of journal entries--Extinguishment of mutual liabilities between assessees and sister concerns--Reasonable cause--Penalty not sustainable--Income-tax Act, 1961, ss. 269SS, 269T, 271D, 271E, 273B--Lodha Builders P. Ltd. v. Asst. CIT (Mumbai) . . . 157

----Limitation--Period starts from date of “action for imposition of penalty†--Meaning of “action for imposition of penalty†--Assessing Officer making reference to Additional Commissioner for initiation of penalty is date of “action for imposition of penalty†not date of show cause notice by Additional Commissioner--Income-tax Act, 1961, s. 275(1)(c)--Lodha Builders P. Ltd. v. Asst. CIT (Mumbai) . . . 157

Presumptive tax --Non-resident--No Double Taxation Avoidance Agreement with Cayman Islands--Provisions of Income-tax Act applicable--Consumables in connection with prospecting for, extraction or production of mineral oil supplied along with plant and machinery given on hire--Receipts taxable under section 44BB--Income-tax Act, 1961, s. 44BB-- Baker Hughes Asia Pacific Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 192

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961

S. 5 --Non-resident--Taxability in India--Income deemed to accrue or arise in India--Terms of contract revealing intention of party to appropriate goods in India--Parties intended for transfer of title in goods in India--Income accrued or arose in India--Matter remanded to Assessing Officer for attributing income out of contracts to extent of operations relating to sales carried out in India--Matter remanded-- Baker Hughes Asia Pacific Ltd. v. Addl. DIT(International Taxation) (Delhi) . . . 192

S. 12A --Charitable purpose--Registration of trust--Cancellation of registration--Only on Commissioner’s satisfaction that activities of trust not genuine or not carried out in accordance with objects of trust-- Parkar Medical Foundation v. Deputy CIT (Pune) . . . 286

S. 12AA --Charitable purpose--Registration of trust--Cancellation of registration--Commissioner discharging quasi-judicial duty--No mala fide intention--No award of costs warranted-- Parkar Medical Foundation v. Deputy CIT (Pune) . . . 286

----Charitable purpose--Registration of trust--Cancellation of registration--Only on Commissioner’s satisfaction that activities of trust not genuine or not carried out in accordance with objects of trust-- Parkar Medical Foundation v. Deputy CIT (Pune) . . . 286

S. 44BB --Non-resident--Taxability in India--Prospecting for, or extraction or production of, mineral oils--Section 44BB encompasses within its ambit all the services connected with oil exploration--Special provision prevails over all other provisions dealing with royalty or fees for technical services--Retrospective amendment not applicable as higher tax burden on assessee--Income to be assessed under section 44BB-- Baker Hughes Asia Pacific Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 192

----Presumptive tax--Non-resident--No Double Taxation Avoidance Agreement with Cayman Islands--Provisions of Income-tax Act applicable--Consumables in connection with prospecting for, extraction or production of mineral oil supplied along with plant and machinery given on hire--Receipts taxable under section 44BB-- Baker Hughes Asia Pacific Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 192

S. 234B --Advance-tax--Interest--No liability to pay interest for contracts where income taxable under section 44BB on presumptive basis--Assessee liable to pay interest in respect of contracts income from which arose in India-- Baker Hughes Asia Pacific Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 192

S. 269SS --Penalty--Acceptance or repayment of deposits exceeding prescribed limit otherwise than by account payee cheque--Transactions between sister concerns by way of journal entries--Extinguishment of mutual liabilities between assessees and sister concerns--Reasonable cause--Penalty not sustainable-- Lodha Builders P. Ltd. v. Asst. CIT(Mumbai) . . . 157

S. 269T --Penalty--Acceptance or repayment of deposits exceeding prescribed limit otherwise than by account payee cheque--Transactions between sister concerns by way of journal entries--Extinguishment of mutual liabilities between assessees and sister concerns--Reasonable cause--Penalty not sustainable-- Lodha Builders P. Ltd. v. Asst. CIT(Mumbai) . . . 157

S. 271D --Penalty--Acceptance or repayment of deposits exceeding prescribed limit otherwise than by account payee cheque--Transactions between sister concerns by way of journal entries--Extinguishment of mutual liabilities between assessees and sister concerns--Reasonable cause--Penalty not sustainable-- Lodha Builders P. Ltd. v. Asst. CIT(Mumbai) . . . 157

S. 271E --Penalty--Acceptance or repayment of deposits exceeding prescribed limit otherwise than by account payee cheque--Transactions between sister concerns by way of journal entries--Extinguishment of mutual liabilities between assessees and sister concerns--Reasonable cause--Penalty not sustainable-- Lodha Builders P. Ltd. v. Asst. CIT(Mumbai) . . . 157

S. 273B --Penalty--Acceptance or repayment of deposits exceeding prescribed limit otherwise than by account payee cheque--Transactions between sister concerns by way of journal entries--Extinguishment of mutual liabilities between assessees and sister concerns--Reasonable cause--Penalty not sustainable-- Lodha Builders P. Ltd. v. Asst. CIT(Mumbai) . . . 157

S. 275(1)(c) --Penalty--Limitation--Period starts from date of "action for imposition of penalty"--Meaning of “action for imposition of penalty†--Assessing Officer making reference to Additional Commissioner for initiation of penalty is date of “action for imposition of penalty†not date of show cause notice by Additional Commissioner-- Lodha Builders P. Ltd. v. Asst. CIT (Mumbai) . . . 157

 

__._,_.__

Completing Income Tax Return without Completing Tax Audit Report

There is lot of confusion among members that Date of Income Tax is extended or not. But CBDT has only extended date of Tax Audit Report. The title of Article itself gives clarity among members. 

Completing Income Tax Return without Completing Tax Audit Report

Article by CA Sunil Dandekar

The extension of date for obtaining and submitting the Tax Audit Report till 30^th November 2014 for the Assessment Year 2014-15 without extending the due date to file the Return of Income has created many concerns in the minds of Chartered Accountants.

The Income Tax Return formats also now modified to include the new row asking "if liable for Tax Audit u/s 44AB is YES, whether the accounts have been audited by the Accountant ? If YES, furnish the following information" clearly indicating that the return of income needs to be filed before 30^th September, 2014 and can be filed without filing of Audit Report.

Various concerns are raised regarding how to complete the Income Tax Return without completing the Audit Report. If we analysis the Tax Audit Report Format, we can divide the clauses under main four categories comprising of Basic Information, Information regarding Accounts and Accounting Policies, Information relating to Income Computation and Other Information.

To finalise the Income Tax Return, we need to concentrate mainly on the 3^rd category which ask for information relating to Income Computation which covers the following clauses –

Sr.No.	Clause No.	Particulars
1	12	Whether Profit and Loss Account includes profit assessable on presumptive basis
2	15	Capital Assets converted into Stock in Trade
3	16	Amounts not credited to Profit and Loss Account
4	17	Whether land and Building transferred during year
5	18	Depreciation allowable
6	19	Amounts debited to Profit and Loss and admissible under Income Tax
7	20(a)	Sum paid to employees as bonus or commission otherwise payable as profits or dividend
8	20(b)	Contributions received from employees under various Schemes
9	21(a)	Details of debited to Profit and Loss such as Personal, Capital, Advertisement expenses
10	21(b)(i)	Amounts inadmissible u/s 40(a)(i) – Payment to Non-resident
11	21(b)(ii)	Amounts inadmissible u/s 40(a)(ia) – Payment without TDS / Late Payment
12	21(b) Others	Amounts inadmissible u/s 40(a) – Payments towards
13	21( c )	Amounts debited to Profit & Loss Account & inadmissible, with computation, under section
14	21(d)	Disallowance or Deemed Income u/s 40A(3) / (3A)
15	21(g)	Particulars of Liability of Contingent Nature
16	21(h)	Expenditure disallowable u/s 14A
17	21 & 22	Amounts inadmissible – Payments towards
18	23	Particulars of Payments made to related persons 40A(2)(b)
19	24	Deemed Profit
20	25	Chargable u/s 41 with computation
21	26	Liabilities allowable and disallowable u/s 43B
22	27(a)	Cenvat credit summary
23	27(b)	Prior Period Income and Expenditure credited or debited to Profit and Loss
24	28	Income u/s 56(2)(viia) – Receipt of Shares without adequate consideration
25	29	Income u/s 56(2)(viib) – Consideration Recd in excess of FMV for issue of Shares
26	32	B/f Lossses
27	33	Deduction under Chapter III or VI-A

Once the information on above clauses are confirmed and audited, there will be no need to revise the return after finalizing of the Audit Report. We should concentrate on compilation of the information required by these clauses and need not waste time in filling up the actual report.  A Sample format of the details required for each clause is made available onhttp://www.meraconsultant.com

Everybody is required to suggest ways and methodology to complete the filing of income tax return without completing Audit Report which will help all to do work efficiently as well as smoothly and will not put us in a panic situation.

http://taxguru.in/income-tax/completing-income-tax-return-completing-tax-audit-report.html

PF wage ceiling moves up from Rs. 6,500 to Rs. 15,000

Dear All:

 

The Employees' Provident Fund Organization through the Ministry of Labour & Employment has issued a notification to enhance the statutory wage ceiling for coverage of an employee.

 

Effective from September 1, 2014, the wage ceiling has been raised from existing Rs. 6,500 to Rs. 15,000  per month while the minimum monthly pension for EPFO schemes has been fixed to a minimum  Rs.1,000/- per month. Now, in case of the death of an EPFO subscriber, his/her family will be entitled to maximum sum assured of Rs. 3.6 lakh instead of existing Rs. 1.56 lakh.

 

Further, an additional 20% relief on the amount of assurance benefit admissible under the EDLI Scheme, 1976 has been declared.

 

Please note that the existing members as on the 1^st of September 2014 who has been contributing on the salary exceeding Rs. 6,500/- may on a fresh option ( to be exercised jointly by employer and employee) continue to contribute on the salary exceeding Rs.15,000/-. This fresh option shall be exercised by the member within 6 months.  

 

For Instance: Assume that the basic salary of employee "X" is Rs.20,000/-. As per statutory regulations, he is exempted from payment of contribution towards EPFO; however he has the choice of voluntary contribution. Thus the amount of contribution as per the amendment will be calculated as follows:

 

	Statutory Contribution (Rs.)	Voluntary Contribution (Rs.)
	Before Amendment
Contribution by Employer	6,500 * 12%	20,000 * 12%
Contribution by Employee	6,500 * 12%	20,000 * 12%
	After Amendment
Contribution by Employer	15,000 * 12%	5,000 * 12% (20,000- 15,000)
Contribution by Employee	15,000 * 12%	5,000 * 12% (20,000- 15,000)

Further, the aforesaid mentioned employee X will to have pay an additional contribution at the rate of 1.16% per month on the salary exceeding 15,000/-  (i.e. in this case on the amount Rs.5,000/-) .

 

For notification click here: https://drive.google.com/file/d/0B8GyRsbVIg8gRjdqd2tpR2djT2pmdC1PMnUzLUVOaThWeEdz/edit?usp=sharing

PF wage ceiling moves up from Rs. 6,500 to Rs. 15,000

Dear All:

 

The Employees' Provident Fund Organization through the Ministry of Labour & Employment has issued a notification to enhance the statutory wage ceiling for coverage of an employee.

 

Effective from September 1, 2014, the wage ceiling has been raised from existing Rs. 6,500 to Rs. 15,000  per month while the minimum monthly pension for EPFO schemes has been fixed to a minimum  Rs.1,000/- per month. Now, in case of the death of an EPFO subscriber, his/her family will be entitled to maximum sum assured of Rs. 3.6 lakh instead of existing Rs. 1.56 lakh.

 

Further, an additional 20% relief on the amount of assurance benefit admissible under the EDLI Scheme, 1976 has been declared.

 

Please note that the existing members as on the 1^st of September 2014 who has been contributing on the salary exceeding Rs. 6,500/- may on a fresh option ( to be exercised jointly by employer and employee) continue to contribute on the salary exceeding Rs.15,000/-. This fresh option shall be exercised by the member within 6 months.  

 

For Instance: Assume that the basic salary of employee "X" is Rs.20,000/-. As per statutory regulations, he is exempted from payment of contribution towards EPFO; however he has the choice of voluntary contribution. Thus the amount of contribution as per the amendment will be calculated as follows:

 

	Statutory Contribution (Rs.)	Voluntary Contribution (Rs.)
	Before Amendment
Contribution by Employer	6,500 * 12%	20,000 * 12%
Contribution by Employee	6,500 * 12%	20,000 * 12%
	After Amendment
Contribution by Employer	15,000 * 12%	5,000 * 12% (20,000- 15,000)
Contribution by Employee	15,000 * 12%	5,000 * 12% (20,000- 15,000)

Further, the aforesaid mentioned employee X will to have pay an additional contribution at the rate of 1.16% per month on the salary exceeding 15,000/-  (i.e. in this case on the amount Rs.5,000/-) .

 

Regards,
-------
CA.C.V.PAWAR
PATIL DAWARE GIRASE PAWAR & ASSOCIATES

CHARTERED ACCOUNTANTS

0253-2319641. M-9423961209

TDS intimations cannot be in the form of Demand U/s. 156 2. TDS credit for salary allowed even if employer has not uploaded the same

TDS intimations cannot be in the form of Demand U/s. 156 

From a reading of the Centralised Processing of Statements of Tax Deducted at Source Scheme, 2013 it becomes clear that the Department has sought to achieve a comprehensive processing of statements filed under sub-section (3) of Section 200 of the Act, including rectification of a mistake in the said statement under Section-154 of the Act. The scheme also provides for an appeal under Clause (8). On a reading of the said scheme, it becomes clear that when once a Statement is filed under sub-section (3) of Section 200 of the Act, Clauses (4), (5) and (7) of the Scheme come into operation.   At the stage of processing of the scheme, Clauses (9) and (10) are also applicable. It is in terms of these clauses, the petitioner received Annexures:D1 & D2, which are the intimations issued under Section 200-A of the Act.   The petitioner having accepted those intimations, paid the outstanding dues as stated in those intimations. Thereafter, the respondents-Authorities have initiated proceedings for rectification of the statement under Section 154 of the Act, to be precise, i.e., under Clause (3) of sub-section (1) of Section 154 of the Act. In that context, Clause (6) of the scheme is pertinent, which is extracted above. Sub-clause (1) of Clause (6) of the scheme says t hat the income tax authority in order to rectify   any mistake apparent from the record under Section 154 of the Act either on its own motion or on   receiving an application from the deductor.   The format of the application for rectification is as stipulated in sub-clause (2).   Sub-clause (3) is relevant for the purpose of the case, which states that, where a rectification has the effect of reducing the refund or increasing the liability of the deductor, an intimation to that effect shall be sent to the deductor electronically by the Cell and the reply of the deductor shall be furnished in the form and manner specified by the Director General.   In this context, the argument of the counsel for the petitioner is that the impugned intimations are in the nature of demands made under Section 156 of the Act, as it expressly states so and even what is stipulated in sub-clause (3) of Clause (6) that an intimation calling for a reply has not been given to the petitioner, instead impugned annexures straightway make a demand for the payment of alleged dues under Section 156 of the Act.   It is contended that not only is there violation of sub-clause (3) of Clause (6) of the Scheme, but there is also violation of sub-section (3) of Section 154 of the Act. On perusal of the impugned intimations in light of sub-clause (3) of Clause (6) of the Scheme, it is noted that, no doubt the intimations that are impugned are issued under Section 154 of the Act. But, when the scheme itself envisages that the intimation must be issued so as to call for a reply from the deductor then it cannot be in the form of a demand under Section 156 of the Act.   The impugned annexures are straightway issued in the nature of demands under Section 156 of the Act by-passing the requirement as stated in sub- clause (3) of Clause (6) of the Scheme. That apart, sub- clause (4) states that where an amendment has the effect of reducing a refund already made or increasing the liability of the deductor, the order under Section 154 of the Act passed by an income-tax authority of the Cell shall be deemed to be a notice under Section 156 of the Act.   In this context, it was submitted that, without complying with the requirements of sub-clause (3) of Clause (6) and sub-seciton (3) of Section 154 of the Act, the impugned intimations are deemed to be notices under Section 156 of the Act and therefore, the impugned notices have to be quashed.  On a reading of Clause (6) of the Scheme that I find, what is envisaged is that before any order is passed under Clause (6) of the Scheme, an intimation has to be sent to the deductor, which is in the nature of a showcause notice and after receiving a reply from the deductor and considering the same, an order has to be passed, then it would be deemed to be a notice of demand under Section 156 of the Act.     The same not being done in the instant case, on that short ground alone, the impugned intimations namely, Annexures:C1 & C2, F1 & F2 and G1 & G2   have to be quashed, as they cannot be deemed to be notices of demand under Section 156 of the Act.   However, instead of directing the respondents-authorities to re-initiate fresh proceedings under Section 154 of the Act, for the sake of convenience of the parties, the impugned annexures: C1 & C2, F1 & F2 and G1 & G2 could be construed as show cause notices or intimations as stated in sub- clause (3) of Clause (6) of the Scheme to which the petitioner is at liberty to reply within a period of three weeks from the date of receipt of a certified copy of this order   and on receipt of the reply by the respondents- Authorities, the same shall be considered in accordance with law and a speaking order be passed thereon.   Till then no precipitative or coercive action to be taken by the respondents pursuant to the impugned notices or intimations. It is needless to mention that, in the event the petitioners does not reply to the impugned annexures, which are construed as showcause notices, within the aforesaid time frame, the respondents- Authorities are at liberty to take steps in accordance with law. Source- Page Industries Ltd. Vs. UOI (Karnataka High Court), Writ Petition Nos. 10263 & 10264/2014 (T-IT), Date of Pronouncement – 31st Day of July 2014 

http://taxguru.in/income-tax-case-laws/tds-intimations-form-demand-156.html

HC -TDS credit for salary allowed even if employer has not uploaded the same in the Department's system

 

Ratio:

Credit for TDS made by the employer from the employee's salary is to be allowed, even if the employer has not uploaded the same in the Department's system through filing proper TDS return.
 

Held:

The learned Standing Counsel for Government of India [Taxes] produces a Circular, numbered as F.No.275/032013-IT(B) dated 08.07.2013 [Instruction No.05/2013], wherein a communication was issued by the CBDT taking into account the difficulties faced by the various assessees for reason only of the tax being not uploaded and also pursuant to the directions issued by the Delhi High Court. The Instruction clearly mandates as to how the tax deduction made by the employer, on evidence being produced, is to be dealt with, though not uploaded in the system.

This was the precise request made by the petitioner as per Exhibit P2, wherein he had produced the tax deduction certificate, issued under Form No.16 by his employer. In fact the assessee had produced Exhibit P4, which is subsequent to Instruction No.05/2013 and which would also further the case of the assessee. In such circumstance, Exhibit P3 is set aside. The Assessing Officer, the 1st respondent, shall consider the same in accordance with Instruction No.05/2013, Exhibit P4 as also in tune with the dictum laid down by the various High Courts in Exhibits P5 and P6. The petitioner shall approach the Assessing Officer personally within two weeks and produce a certified copy of this judgment along with legible copies of Exhibits P5 and P6 judgments; and within two months from the date of appearance, the matter shall be settled by the Assessing Officer, after calling for any further details from the petitioner, if so required.
 

Reported in:

(2014) TaxCorp (DT) 57972 (HC)

iT Matter September-2014

---------- Forwarded message ----------
From: ZAWAR ASSOCIATES <zawarasso.ca@gmail.com>
Date: Tue, Sep 2, 2014 at 12:08 PM

Respected Sir,

"Have a Great Day"

Please find the "iT Matter September-2014"

We look forward to your valuable feedback/suggestion, as it will help us to improve & cover topics desired by you.

 

click here: https://drive.google.com/file/d/0B8GyRsbVIg8gYS0wbWNFVFZuN3oxV0xxdmhPbDVQQUswNzQ0/edit?usp=sharing

Regard

ZAWAR ASSOCIATES

BST bus @ BKC ICAI Bhawan

BEST route approved for WIRC from Bandra Terminus
We are glad to inform you that the BEST has considered our request and approved the extension of BEST Bus Service- BKC-3 upto ICAI Tower and vice versa to Bandra Terminus, (two service in the morning at 9.00am and 9.15am from Bandra Terminus upto ICAI Tower and two service in the evening from ICAI Tower at 5.15pm and 5.45pm). This will immensely benefit large number of CA students who are coming to the ICAI tower for attending , OP/ITT/GMCS classes and also the staff of ICAI.

-Regards
CA.C.V.PAWAR