Updates

Income Tax Updates1.TDS default doesn't invite sec. 40(a)(ia) disallowance if total income of deductor is exempt

2. High Court unhappy with CBDT for refusing to condone delay of one day in filing return

3. Cultivation of agricultural land by assessee himself isn't necessary to claim sec. 54B relief

Service tax Updates
4. CBEC - Service Tax 

5. Tax Payer Service Vertical to address tax payers' grievances

Point Of Discussion
6. Tax free gift

Professional Updates
Bad News for our profession
7. IBA allow members of ICMA as Stock Auditor
please send a mail to PDC ICAI , President ICAI and VP ICAI to raise voice.
In Detailed :-

1.TDS default doesn't invite sec. 40(a)(ia) disallowance if total income of deductor is exempt

IT : Where assessee's total income is exempt under section 10(26), for assessee's lapse of not complying with his tax withholding obligations, there cannot be any occasion to invoke section 40(a)(ia) to treat relevant amount disallowable as an income of assessee on standalone basis

• Disallowance under section 40(a)(ia) does make good of lapses in deduction of tax at source, when such tax deductions are due; this provision is not for purpose of penalizing assessee for failure to deduct tax at source

 [2015] 60 taxmann.com 360 (Guwahati - Trib.)

IN THE ITAT GUWAHATI BENCH

Tamchikusuk v. Additional Commissioner of Income-tax, Range, Tezpur, Assam

2. High Court unhappy with CBDT for refusing to condone delay of one day in filing return

IT: Refusal by CBDT to condone one day delay in filing of return of income is a failure to exercise of power vested under section 119(2)(b)

 [2015] 60 taxmann.com 233 (Bombay)

HIGH COURT OF BOMBAY

Cosme Matias Menezes (P.) Ltd. v. Commissioner of Income-tax, Goa*

Section 139, read with sections 119 and 239, of the Income-tax Act, 1961 - Return of income (Condonation of delay in filing return) - Assessment year 2006-07 - Petitioner assessee filed its return of income one day late and refund claimed was not granted by department - Assessee filed an application under section 119(2) with CBDT to condone delay but same was dismissed - Whether approach adopted by CBDT in refusing to condone delay was a pedantic resulting great hardship to petitioner assessee - Held, yes [Paras 9 and 11] [In favour of assessee]

3. Cultivation of agricultural land by assessee himself isn't necessary to claim sec. 54B relief

IT : Once it is established that land owned by assessee has been used for agricultural purpose, he becomes entitled for claim under section 54B on sale of land even if he is not a cultivator himself but gets it cultivated under his supervision

IT : An assessee is entitled to benefit of exemption under section 54B with regard to 'on money' declared in course of search but not reflected in sale register

 [2015] 60 taxmann.com 219 (Ahmedabad - Trib.)

IN THE ITAT AHMEDABAD BENCH 'B'

Shree Bhagwanbhai Revabhai Prajapati v. Assistant Commissioner of Income-tax, Central Circle 1 (4) *

4. CBEC - Service Tax 

CBEC has issued Clarification regarding the provision of Section 73, 76 and 78 of the Finance Act, 1994 and Section 11AC of the Central Excise Act, 1944 after amendments made vide Finance Act. 2015 made with effect from 14.05.2015. An attempt has been made to clarify the doubts on Issuance of a Show Cause Notice (SCN), whether the SCN have to be issued in a case involving the extended period of limitation, where the assessee pays the tax/duty, interest and 15% penalty as prescribed or not and doubts w.r.t the Conclusion of proceedings and who is competent to order conclusion of proceedings if the conditions meriting conclusion of proceedings are fulfilled.

  

5. Tax Payer Service Vertical to address tax payers' grievancesThe government is set to unveil taxpayer service verticals for the indirect tax to deal with grievances and also work out ways to make the system more consumer-friendly and address constant complaints. 

Today (Monday, 24^th Aug 15) the Central Board of Excise and Customs (CBEC) is expected to announce its taxpayer services vertical, headed by a director general, along with two other verticals, at a meeting of chief commissioners that will be also be attended by finance minister.

"The entity will deal with grievances and make sure that services offered to taxpayers, both individuals and companies, improve," said an officer. 

6. Point Of DiscussionTax free gift :- Can I receive any sum of money or immovable property as gift from other than relative and need not pay tax on it ?

Yes, you can receive ANY SUM OF MONEY OR IMMOVABLE PROPERTY (without consideration or at consideration which is less than stamp duty value) as gift from anyone (from other than relative also) in the some cases/occasions, out of which three common occasions are as below :-

(1). On the occassion of marriage of the individual, (i.e. gift can be of any sum of money or immovable property)

(2). under a will 

(3). In contemplation of death of the payer or donor ( if any person even if not a relative, is about to die or suffering from incurable disease can make gift of movable property, it will not be taxable in hands of donee, Income tax act doesn't restrict gift of immovable property in such cases but Indian Succession Act defines that gift should be of movable property only, in contemplation of death ).

Income Tax Case Laws

1.Govt. notifies 'Challan No. ITNS 284' for depositing taxes under Black Money Act

2.High Court has inherent power to review its own judgment, says Supreme Court

3. Penalty couldn't be imposed more than once for same default of not complying with sec. 143(2)

4. Compounding fee paid to Municipal Corporation is in nature of penalty; disallowable

5. Govt. notifies backward areas of Bihar to provide tax incentives for setting-up of industrial units

In Detailed

2. High Court has inherent power to review its own judgment, says Supreme Court

August 19, 2015[2015] 60 taxmann.com 260 (SC)

IT : Application of Code of Civil Procedure to appeals to High Court is not in any way restricted or curtailed by section 260A(7). Section 260A(7) only states that all the provisions that would apply qua appeals in the Code of Civil Procedure would apply to appeals under Section 260A. That does not in any manner suggest either that the other provisions of the Code of Civil Procedure are necessarily excluded or that the High Court's inherent jurisdiction is in any manner affected. High Courts being Courts of Record under Art. 215 of the Constitution of India, the power of review would in fact inhere in them

 [2015] 60 taxmann.com 260 (SC)

SUPREME COURT OF INDIA

Commissioner of Income-tax, Guwahati-I v. Meghalaya Steels Ltd.

3. Penalty couldn't be imposed more than once for same default of not complying with sec. 143(2)

iT: Penalty under section 271(1)(b) cannot be imposed for each and every notice issued under section 143(2), which remained not complied with on part of assessee, but it should be restricted to first default only

 [2015] 60 taxmann.com 131 (Delhi - Trib.)

IN THE ITAT DELHI BENCH 'F'

Smt. Rekha Rani v. Deputy Commissioner of Income-tax, Central Circle-8, New Delhi*

4. Compounding fee paid to Municipal Corporation is in nature of penalty; disallowable

[2015] 60 taxmann.com 54 (Pune - Trib.)

IN THE ITAT PUNE BENCH 'B'

Modi Builders v. Joint Commissioner of Income-tax, Range-5, Pune*

5. Govt. notifies backward areas of Bihar to provide tax incentives for setting-up of industrial units

August 18, 2015

SECTION 32, READ WITH SECTION 32AD, OF THE INCOME-TAX ACT, 1961 - DEPRECIATION - NOTIFIED BACKWARD AREAS IN SPECIFIED DISTRICTS OF STATE OF BIHAR UNDER FIRST PROVISO TO SECTION 32(1)(iia) AND SECTION 32AD(1)

NOTIFICATION NO.71/2015 [F.NO.142/13/2015-TPL], DATED 17-8-2015

In exercise of the powers conferred by section 52 and section 32AD of the Income-tax Act, (43 of 1961) the Central Government herein notifies the following districts of the State of Bihar as backward areas under the first proviso to clause (iia) of sub-section (1) of section 32 and sub-section (1) of section 32AD, namely:—

1.		Patna
2.		Nalanda
3.		Bhojpur
4.		Rohtas
5.		Kaimur
6.		Gaya
7.		Jehanabad
8.		Aurangabad
9.		Nawada
10.		Vaishali
11.		Sheohar
12.		Samastipur
13.		Darbhanga
14.		Madhubani
15.		Purnea
16.		Katihar
17.		Araria
18.		Jamui
19.		Lakhisarai
20.		Supaul
21.		Muzaffarpur.

2. This notification shall come into force on the date of its publication in the Official Gazette.

UPDATES:

CBDT vide Notification No. 2/2015 dated 13.07.2015 started to facilitate the taxpayers and to provide end-to-end e-enabled services, the Income tax return for A.Y. 2015-2016 can now be verified electronically.

Penalty u/s 271 (1) (C) of the Income Tax Act cannot be levied in succeeding year if on similar disallowance, no penalty was levied in preceding year.[ ACIT vs Dhariwal Industries Ltd, ITAT]

Updated costing taxonomy 2015, Business rules and MCA XBRL validation tool version 2.0(beta) has been released.

Power u/s 18 of Customs Act cannot be exercised arbitrarily without a good reason to subject goods to any test – [Honarable Supreme Court in the case of Tata Chemicals Ltd.]

Use modified version of Form MR-2 (Approval of appointment, remuneration etc. of MD / WTD/Manager from CG) w.e.f. 14.08.2015.

COMPULSORY SWITCHOVER OF PROFESSIONAL PROGRAMME (OLD SYLLABUS) STUDENTS TO PROFESSIONAL PROGRAMME (NEW SYLLABUS) EFFECTIVE FROM DECEMBER, 2015 EXAMINATION SESSION

ATTENTION STUDENTS ! 

 As all the students may be aware, the last examination under Professional Programme (Old Syllabus 2007) was held in June, 2015 Session. Some of the Professional Programme (Old Syllabus) Students who have appeared in June, 2015 Session of examinations are expected to complete the Professional Programme Stage. After declaration of results for June, 2015 Session, the remaining students are compulsorily required to switchover to the New Syllabus before December, 2015 Session. Old Syllabus Students who have appeared in partial number of modules or not appeared in any module, are in any case required to switchover to New Syllabus. To facilitate switchover of Old Syllabus Students to the New Syllabus, the following arrangements have been made :- 1. Students who have not enrolled for June, 2015 Session may submit their online requests for switchover to New Syllabus immediately so that their online profiles can be instantly updated before submission of Examination Form for December, 2015 Session. 2. Students who have enrolled/ appeared in June, 2015 Session may wait till 25th August, 2015 (date of declaration of results) for submission of their online switchover requests. 3. Students who are not interested to appear in December, 2015 Examinations are also advised to submit their switchover request for updation of the respective online accounts. 4. In all cases, students are required to choose one Elective Subject (out of five Elective Subjects available) during the switchover process. 5. Professional Programme (Old Syllabus) Students whose registrations have expired are required to submit their Registration Denovo / Extension requests before submitting their switchover requests. 6. While students enrolling for the December, 2015 Session will be compulsorily required to submit their switchover requests before filling up the examination form, after 10th October, 2015 (the last date for submission of examination form with late fee), all the remaining students will be automatically switched over to New Syllabus & in all such cases the Elective Subject “Banking Law & Practice”(Code No. 341) shall be allotted. Students will have option to change their Elective Subject before enrolling for every examination session and the request has to be essentially submitted before enrolling for the examinations. 7. Request for Switchover can be submitted by the students by logging into the online account at www.icsi.edu (My Account  Requests  Switchover Request). 

TENTATIVE SCHEDULE OF MSOP FOR THE YEAR 2015

• Tentative Schedule of MSOP for the year 2015 

www.icsi.edu/WebModules/LinksOfWeeks/MSOP_TENTATIVE_SCHEDULE_18.08.2015.pdf

Income Tax Case Laws

1.Repayment of loans without any identity of creditors proved that loan receipts were unexplained incomes

2. ITAT sounds note of caution for frivolous appeal by revenue; it damages public faith

3. Sec. 234E which levies fee for late filing of TDS/TCS returns is constitutionally valid, rules HC

4. Order wasn't time-barred as assessee had already found that order was ready to be served on his visit to department

5. CIRCULAR No. 14/ 2015

Sub: Clarification on certain issues related to grant of approval and claim of exemption u/s 10(23C)(vi) of the Income-tax Act, 1961.

MCA Updates

6.  Vacancy Circular for the 02 posts of Technical Member, National Company Law Appellate Tribunal – Dated 10 Aug 2015 
http://www.mca.gov.in/Ministry/pdf/NCLT_Judicial_10082015.pdf

7. Format of Application for the posts of Technical Member, National Company Law Appellate Tribunal

http://www.mca.gov.in/Ministry/pdf/Application_formatNCLAT_10082015.docx

8. Vacancy Circular for the 18 posts of Judicial Member, National Company Law Tribunal – Dated 10 Aug 2015 
http://www.mca.gov.in/Ministry/pdf/NCLT_Judicial_10082015.pdf

In Detailed

1.Repayment of loans without any identity of creditors proved that loan receipts were unexplained incomes

August 12, 2015[2015] 60 taxmann.com 22 (Madras)/[2015] 372 ITR 398 (Madras)(MAG.)

HIGH COURT OF MADRAS

Young Men's Christian Association v. Joint Commissioner of Income-tax (OSD)*

Section 68 of the Income-tax Act, 1961 - Cash credit (Repayment of loan) - Assessment year 2009-10 - Assessee was an association granted registration under section 12AA - Assessing Officer noted that transaction of repayment of loan in cash to tune of Rs. 1.16 crore was brought into books of account with no identity of creditors - Assessing Officer taking a view that it was a case of unexplained credit, treated said amount as undisclosed income of assessee under section 68 - It was found that assessee had not let in any evidence to show that loan received by assessee was repaid by further availing of loan from various parties - Further, assessee had not produced any material by way of any resolution to avail of such loan to discharge liability - Whether in absence of any material furnished by assessee, Assessing Officer was justified in treating said amount as undisclosed income of assessee - Held, yes [Para 6] [In favour of assessee]

2. ITAT sounds note of caution for frivolous appeal by revenue; it damages public faith

August 12, 2015[2015] 60 taxmann.com 160 (Delhi - Trib.)

IT : Filing of appeal with complete knowledge of its fate by the Revenue only reflects the mischievous adamancy to attempt to mislead the Tribunal and waste the time of the Court and the officers concerned.

IN THE ITAT DELHI BENCH 'E'

Assistant Commissioner of Income-tax, Central Circle-12, New Delhi v. R.P.G. Credit & Capital Ltd.

3. Sec. 234E which levies fee for late filing of TDS/TCS returns is constitutionally valid, rules HC

August 11, 2015[2015] 60 taxmann.com 144 (Karnataka)

IT : Section 234E does not suffer from any vices for being declared to be ultra vires of the Constitution. Section i.e., 234E is intra vires of the Constitution

[2015] 60 taxmann.com 144 (Karnataka)

HIGH COURT OF KARNATAKA

Lakshminirman Bangalore (P.) Ltd. v. Deputy Commissioner of Income-tax, Ghaziabad

4. Order wasn't time-barred as assessee had already found that order was ready to be served on his visit to department

August 14, 2015[2015] 59 taxmann.com 389 (Calcutta)/[2015] 372 ITR 414 (Calcutta)(MAG.)

IT : Where assessee visited Department's office and found assessment order was ready to be served upon him and also there was no indication that Assessing Officer revised his order, assessment order could not be treated as barred by limitation

HIGH COURT OF CALCUTTA

Commissioner of Income-tax v. Binani Industries Ltd.*

5. CIRCULAR No. 14/ 2015

F.No.197/38/2015-ITA-I

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

North Block, New Delhi

August 17^th  , 2015

Sub: Clarification on certain issues related to grant of approval and claim of exemption u/s 10(23C)(vi) of the Income-tax Act, 1961.

Sub-clause (vi) of clause (23C) of Sec 10 of the Income-tax Act, 1961 (‘Act’) prescribes that income of any university or other educational institutions, existing solely for educational purposes and not for purposes of profit, shall be exempt from tax if such entities are approved by the prescribed authorities. Such approval is not required in cases of university or educational institutions wholly or substantially financed by the Government [sub-clause (iiiab)] or if their aggregate annual receipts do not exceed Rs. 1 crore [sub-clause (iiiad) r.w. rule 2BC]. Thus, while granting approval to entities covered under sub-clause (vi), the prescribed authority has to ensure that the applicant institution must exist “solely for educational purposes and not for purposes of profit”. There are several Provisos to clause (23C) of section 10 and prescribe, inter alia, various monitoring conditions subject to fulfillment of which only, the exemption can be availed.

These monitoring conditions include mode and manner of application of funds, maintenance and audit of books of accounts in certain situations etc. Some other Provisos prescribe the manner of making application u/s 10(23C)(vi) and the circumstances when an approval granted earlier can be withdrawn.

Representations have been received seeking clarification on certain issues related to operation of section 10(23C)(vi). These have been examined by the Board and following clarifications are made –

1.     Scope of enquiry while granting approval-

1.1  Clarification has been sought on the scope of enquiry that can be made by the prescribed authority while granting approval u/s 10(23C)(vi), i.e., whether it would be sufficient for the prescribed authority to consider the nature, existence

for non-profit purposes and genuineness of the applicant institution or the conditions prescribed under various Provisos are also required to be considered at the stage of granting approval.

1.2   In this connection, attention is drawn to the decision of Hon’ble Supreme Court in case of American Hotel and Lodging Association Educational Institute vs. CBDT [301 ITR 86](2008) in which it has been held that at the time of granting approval u/s 10(23C)(vi), the prescribed authority is to be satisfied that the institution existed during the relevant year solely for educational purposes and not for profit. Once the prescribed authority is satisfied about fulfillment of this criteria i.e. the threshold pre-condition of actual existence of an educational institution under section 10(23C)(vi), it would not be justifiable, in denying approval on other grounds, especially where the compliance depends on events that have not taken place on the date on which the application for grant of approval has been made.

1.3  However, the prescribed authority is eligible to grant approval u/s 10(23C)(vi), subject to such terms and conditions as deemed necessary including those falling within the framework of various Provisos to the said clause of section 10. It has also been clarified in the said judgment that the compliance of prescribed conditions can be gauged while monitoring the case and in case of any breach thereof, the approval can be withdrawn. It is, therefore, clarified that the principle laid down by the Apex Court in American Hotels case (supra) must be followed while considering the applications filed seeking approval for exemption u/s 10(23C)(vi).

2.     Necessity for registration u/s 12AA while seeking approval /claiming exemption u/s 10(23C)(vi)

2.1  Section 10(23C)(vi) does not prescribe any stipulation which makes registration u/s 12AA a mandatory pre or post condition. In fact, provisions of section 11 and 10(23C) are two parallel regimes and operate independently in their respective realms although some of the compliance criteria may be common to both. Hence obtaining prior registration before granting approval u/s 10(23C) cannot be insisted upon.

2.2   However, in case of a trust or an institution having obtained registration u/s 12AA as well as approval u/s 10(23C)(vi), if registration is withdrawn at some point of time due to certain adverse findings, the withdrawal of approval u/s 10(23C)(vi) shall not be automatic but will depend upon whether these adverse findings also impact the conditions necessary to keep approval u/s 10(23C)(vi) alive.

3.     Generation of surplus out of gross receipts

A doubt has been raised whether generation of surplus out of gross receipts would necessarily ‘breach’ the threshold condition that the educational institution should exist

‘solely for educational purpose and not for the purpose of profit’. Perusal of prescribed provisions clearly reveal that mere generation of surplus cannot be a basis for rejection of application u/s 10(23C)(vi) on the ground that it amounts to an activity of the nature of profit making. In fact, the third Proviso to the said clause clearly provides that accumulation of income is permissible subject to the manner prescribed therein provided such accumulation is to be applied “wholly and exclusively to the objects for which it is established”. Hence, it is clarified that mere generation of surplus by educational institution from year to year cannot be a basis for rejection of application u/s 10(23C)(vi) if it is used for educational purposes unless the accumulation is contrary to the manner prescribed under law.

4. Collection of amounts under different heads of fee from students-

It has been brought to the notice that collection of small amounts from students by way of application fee, examination fee, fee for issuing transfer certificate, subscription fee for library etc. is being treated by some Assessing Officers as profit making activity resulting in denial of exemption u/s 10(23C)(vi). Collection of small and reasonable amounts under different heads of fee, which are essentially in the nature of fee connected with imparting education and do not violate any Central or State regulation does not, in general, represent a profit making activity. Hence, there is no justification for treating the charging of small amounts under different heads of fee as profit making activity unless the amount in the nature of ‘capitation fee’ is charged directly or indirectly.

5.     Impact of extraordinary powers of the Managing Trustees to appoint remove or nominate other trustees.

5.1  Doubt has been expressed whether extraordinary powers to the Managing Trustees to appoint or remove other trustees and also to nominate their successor affect the nature of charitable activity of the trust and whether in such an eventuality, exemption can be denied.

5.2   There is no provision under the Act which calls for denial of exemption merely on account of appointment or removal of trustees. Although answer to such a situation would normally depend on the factual implication of such arrangement, the same should generally not be a ground for denying exemption unless the nature of activities of the trust or institution get changed or modified or no longer remain to exist ‘solely for educational purpose and not for purposes of profit’. Hence denial of exemption would not be justifiable only on the ground of induction of new trustees or removal of existing ones.

6.                  Field authorities are advised to keep the above position in mind while dealing with the matters of approval /exemption u/s 10(23C)(vi). Similar principles would also apply to cases covered u/s 10(23C)(via) of the Act.

(Deepshikha Sharma) Director to the Government of India

Copy to :-

1.      The Chairperson, Members and all other officers in CBDT of the rank of Under Secretary and above.

2.      All Pr.Chief Commissioners/ Pr. Director General of Income-tax/ Chief Commissioner of Income-tax (Exemptions) – with a request to circulate amongst all officers in their regions/ charges.

3.      Pr. DGIT (Systems)/ Pr.DGIT (Vigilance)/ Pr.DGIT (Admn.)/ Pr. DGIT (NADT)/ Pr.DGIT (L&R).

4.      Media Coordinator and Official spokesperson of CBDT.

5.       The Additional Director General (PR, PP & OL), Mayur Bhawan, New Delhi for printing in the quarterly tax bulletin and for circulation as per usual mailing list (100 copies).

6.      ITCC Division of CBDT (3 copies).

7.      Data Base Cell – for placing it on www.irsofficersonline.gov.in

8.       DIT (S) -4/ Web manager for placing it on www.incometaxindia.gov.in