Friday, February 5, 2010



Volume 320 : Part 6




* Twisting and texturising partially oriented yarn entitled to deduction in terms of section 80-IA : CIT v. Emptee Poly-Yarn P. Ltd. p. 665

* Determination of nature of gain or loss on renunciation, the crucial dates are date on which the right comes into existence and date of renunciation of such right : Navin Jindal v. Asst. CIT p. 708


* Court will not interfere with Tribunal's finding that house was partly used for purpose of business and partial relief of Rs. 1 lakh given by Tribunal : Rotomac Gobals P. Ltd. v. CIT (All) p. 616

* Remanding matter to examine matter afresh by Tribunal not proper where Commissioner (Appeals) examining identity, creditworthiness and genuineness of each of shareholders on merits held in favour of assessee : Bhav Shakti Steel Mines P. Ltd. v. CIT (Delhi) p. 619

* AO to issue notice u/s 143(2) to assessee where information contained in tax audit report does not enable AO to make any prima facie adjustments u/s 143(1)(a) : Peerless General Finance and Investment Co. Ltd. v. CIT (Cal) p. 622

* TRO empowered to investigate any claim or objection in connection with attachment or sale of property : Vishwanath Agarwala v. TRO (Cal) p. 636

* Amount spent by liquor manufacturer on giving free samples to defence establishments deductible : Brihan Maharashtra Sugar Syndicate Ltd. v. Deputy CIT (Bom) p. 658

* Loss due to fluctuation in rate of foreign exchange treated as business loss where assessee obtaining loan in foreign exchange and utilising amount for money-lending and bill discounting business : CIT v. Goyal M. G. Gases P. Ltd. (Delhi) p. 669

* Interest payable by assessee for failure to deduct tax till due date of filing return by payee : CIT v. Trans Bharat Aviation P. Ltd. (Delhi) p. 671

* Revision by Commissioner not valid where notice referring to four issues but order referring to nine issues : CIT v. Ashish Rajpal (Delhi) p. 674

* Opportunity to AO mandatory where assessee itself produce additional evidence before Commissioner (Appeals) : CIT v. Shree Kangra Steel P. Ltd. (HP) p. 691

* Surplus realised on sale of shares by assessee to its subsidiary companies exempt from capital gains : CIT v. Shahibaug Enterprises P. Ltd. (Guj) p. 695

* Amount paid to obtain additional share exempted : Lalitaben Hariprasad v. CIT (Guj) p. 698

* Difference between price of shares allotted to assessee and market price treated as income of assessee : CIT v. Kirtivan D. Kotian (Karn) p. 704

* Surplus received on cancellation of foreign exchange forward contract was a capital receipt not taxable : Deputy CIT (Assessment) v. Garden Silk Mills Ltd. (Guj) p. 720


* Revenue subsidies vis-a-vis deductions u/s 80-IA, 80-IB or 80-IC (Sanjay Mody, Chartered Accountant) p. 1

* New Dispute Resolution Scheme : A critique (Himanshu S. Sinha, Partner, Associated Law Advisers, Delhi, formerly TPO) p. 12

* Condonation of delay in filing application under section 10(23C)(vi)-(T. N. Pandey, Retd. Chairman, CBDT) p. 17


* Finance Ministry rearranges tax intelligence arm to counter evasion

The Finance Ministry has overhauled its income-tax (I-T) intelligence wing in order to speed up investigation of high-value cases of Rs. 10 lakh and above and stop new methods of tax evasion.

Commissioners of Income-tax (CITs) of the Central Information Branch (CIB) will now report to the intelligence wing, headquartered in the national capital.

CIB and the intelligence wing, which were till now performing a support role for the conduct of search and survey operations for the investigation arm of the department, would henceforth independently probe cases of tax evasion, official sources said.

CIB is the nodal office in the department to gather all documents pertaining to transactions in relation to which Permanent Account Number (PAN) or General Index Register Number are given during sale and purchase of property and monetary deposits.

Under the new arrangement, Commissioners (CIB) have been designated as the Directors of Income-tax (DITs), who will report to the Director General of Income-tax, Intelligence.

The intelligence wing would also feed exhaustive taxpayer information to the technology-based database of the department, called 360 degree profiling, sources said.

360 degree profiling enables the Income-tax Department to track all PAN card-based transactions of a taxpayer, including those done by debit and credit cards.

According to official I-T Department guidelines, the intelligence wing "takes up intensive investigation of selected cases or class of cases and develop them for further action or specialised operation. The wing also studies and analyses emerging trends in tax evasion, new modus operandi, create an economic offence data base both in traditional and non traditional fields".

The wing will have enhanced liaison with other enforcement agencies such as the Financial Intelligence Unit, Enforcement Directorate, Directorate of Revenue Intelligence, among others.

The Directorate also has access to all the information received by the department pertaining to Annual Information Return, Tax Deducted at Source, Banking Cash Transactions Tax and Securities Transaction Tax.
[Source : dated January 25, 2010]

* Date for filing ITR-V form extended

The Central Board of Direct Taxes has decided to extend the time limit for filing ITR-V form relating to income-tax returns filed electronically (without digital signature) on or after April 1, 2009, up to March 31, 2010 or within a period of 120 days from the date of uploading of the electronic return data, whichever is later. The ITR-V form should continue to be sent by ordinary post to Post Bag No. 1, Electronic City Post Office, Bengaluru-560100 (Karnataka). However, in cases where e-mail acknowledgement for ITR-V form is not received by the taxpayer from the CPC Bengaluru, the taxpayer may send another duly signed ITR-V form by speed post to Centralized Processing Centre, Electronic City Post Office, Bengaluru, Karnataka-560100.

This has been done in relaxation of the stipulation in Circular No. 3/2009 dated May 21, 2009 which allows taxpayers who file their income-tax returns in electronic form without digital signature to submit their ITR-V form duly verified and signed, within a period of 30 days thereafter to Post Bag No. 1, Electronic City Post Office, Bengaluru, Karnataka-560100, by ordinary post.

The relaxation has been made following requests from taxpayers that, as a one-time measure, the time limit for filing of ITR-V form may be extended to March 31, 2010 and that alternative modes of submission of ITR-V form may also be provided in cases where an ITR-V form has not been received at CPC, Bengaluru by ordinary post.
[Source : dated January 27, 2010]

* Corporate business restructuring gets a tax fillip

In a ruling that will provide great relief to corporates planning to restructure their businesses, the Authority for Advance Ruling (AAR) held that restructuring of businesses cannot be construed as an exercise for avoiding tax in India.

AAR, a quasi judicial body for settling tax disputes involving foreign entities, in an order last week on an application filed by a foreign group companies, held that any tax benefit resulting from the restructuring of businesses cannot be a ground for income-tax (I-T) authorities to conclude that the entire exercise was for avoiding tax.

The companies' rationale for the amalgamation was based on business and commercial grounds. The group had told AAR that with this amalgamation, all the three overseas entities' assets as well as liabilities would be transferred to the Indian company.

This ground was acceptable to AAR, which held that it is within the legitimate right of the parties to enter into transactions that would help them access the benefits given under the tax statute. The AAR also observed that the contracting parties are not expected to do transactions in a way that would entail any tax liability.

The three foreign entities had moved the AAR in relation to the tax benefits resulting from the amalgamation. The AAR's ruling is binding on the company paying taxes and the I-T department.

The I-T authorities did not dispute the fact that its laws provided exemption from capital gains tax on such cases. However, despite admitting that transfer of capital asset is entitled to exemption provided under section 47 with section 2(1B) of the Income-tax Act, the tax authorities held that since the entire exercise was driven by a motivation to avoid tax, the amalgamation should not be accepted by the AAR. It is this argument the AAR had declined to accept.

The I-T Department had told the AAR that the latter should not make any decision until the High Court decides on the application for amalgamation filed by the group. The I-T Department had proposed to intervene in this application and present its case of adverse revenue implications in the event of the approval of the scheme.

The AAR, however, observed that since the amalgamation includes taking over all assets and liabilities, which also included tax recoverable, tax avoidance cannot be seen as the objective of the foreign group. Besides, the Department is proposing to intervene in the matter in the High Court, it is free to request for appropriate direction for recovery of the I-T arrears.
[Source : dated January 28, 2010]

* CBDT to cross-verify all high value refunds this fiscal

The Central Board of Direct Taxes (CBDT) has stated that an officer in the Income-tax Department, Mumbai noticed on or about January 12, 2010 that refunds had been issued from his jurisdiction without his knowledge or approval of his higher authorities. The officer immediately brought the matter to the notice of his superior officers.

On internal inquiry by the Income-tax Department, it was found that User Ids and Passwords of certain officers had been fraudulently used to generate refunds in some cases. Upon detection of the fraud, the following actions were taken by the Income-tax Department to contain the damage :-

(i) Stop payment orders were issued. As a result, refund outgo in at least two cases could be prevented.

(ii) Investigation and search action was undertaken by the Directorate of Income-tax (Investigation), Mumbai to detect the bank accounts to which the refunds had been credited and the beneficiaries.

(iii) I-T investigators have identified the bank accounts, beneficiaries and some of the scamsters involved.

(iv) Mumbai police and CBI Mumbai have been informed.

Further actions being taken to prevent the recurrence of such frauds are as follows :-

a) All high value refunds issued during the current financial year will be cross-verified.

b) The system of handling high value refunds will be replaced with a more robust and foolproof system.
[Source : dated January 25, 2010]


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