ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS ISSUE DATED 17-5-2010
>> Where borrowals transferred interest free to sister concern for purchase of land for business of company and brand name, interest on borrowed capital allowable u/s. 36(1)(iii) : Dy. CIT v. Sophisticated Marbles and Granite Industries (Delhi) p. 220
>> Where goods imported without duty under exemption certificate in earlier year and customs duty paid capitalised, depreciation allowable u/s. 32 : Dy. CIT v. Orient Ceramics and Industries Ltd. (Delhi) p. 246
In the current EEE regime, savings are exempt from tax in all the three stages: contribution, accretion and withdrawal. The EET method, which is considered to be the best global practice for taxation of savings, allows exemption at the first two stages, but provides for a tax on withdrawals at the personal marginal rate.
Government sources said that the via-media option of exempting withdrawals up to a certain threshold and taxing higher amounts could make things complex and invite charges of discrimination. The idea is that the administered interest rate for small savings - which is a tad above the fixed term deposits of banks - causes distortions. Analysts feel it would be pre-mature to suggest a change in the method of taxation of savings at this juncture, as accretion to savings is linked to interest rates. Another factor that weighs on the mind of policymakers is that since the intended purpose of the DTC is to make tax laws simpler, making a distinction between low and high savings could go against its very purpose.
According to the proposed DTC, the permitted savings intermediaries that were proposed to come under the EET regime were approved provident funds, approved superannuation funds, life insurer and the New Pension System Trust. Though the draft code had clarified that only new contributions to the saving schemes after the introduction of the DTC would be subject to the EET method of taxation, tax experts feel that the EET regime of taxing the savings would not be appropriate for the country at this point of time, since social security systems are still not robust. [Source : www.financialexpress.com dated May 5, 2010]
>> Discretion of the Assessing Officer germane to the statute applied
In an order highly critical of the Income-tax Department, the Bombay High Court has pulled up the Department for its "cavalier" approach and on the way tax issues are decided by the Department "without application of mind". The order was pronounced last week by Justice DY Chandrachud and Justice JP Devadhar.
The Division Bench made these observations in an order on a writ petition filed by an engineering major, which had moved court after the Commissioner of Income-tax rejected its petition for a lower rate of tax-deducted-at-source (TDS). The Commissioner had reportedly said that even if excess tax was deducted at source, the taxpayer would come to no harm as he (the taxpayer) is bound to get his money back with interest.
The High Court found the Commissioner's reasoning unacceptable. "We are constrained to observe that the application filed by the assessee has been rejected in a rather cavalier manner and without application of mind to circumstances which are germane to the statute," said the court.
The case is related to a direction from the I-T Department for a lower rate of TDS, which was rejected by the Assessing Officer on the ground that the assessee had failed to furnish figures for the past three years. The company then filed a revision application with the Commissioner of Income-tax.
The High Court found it impossible to accept the view that rejection of an application under section 197 is not an order. Besides, the High Court also noted that the Assessing Officer did not furnish any valid reason for rejecting the application.
The court also made reference to a system that allows discretion of the Assessing Officer, even if the applicant fulfills all the stipulated conditions. [Source : www.economictimes.com dated May 8, 2010]
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