Friday, February 11, 2011

ITR : Volume 331 Part 1 dated 14-02-2011

INCOME TAX REPORTS (ITR) HIGHLIGHTS
ISSUE DATED 14-2-2011 Volume 331 Part 1

    HIGH COURT JUDGMENTS

    ->> Cash system : Interest on enhanced compensation on acquisition of land taxable in the year of receipt : CIT v. Smt. Burfi (P&H) p. 1

    ->> Notice indicating intention to treat director as principal officer : Failure to issue such notice : Prosecution against director quashed : ITO v. Delhi Iron Works P. Ltd. (Delhi) p. 5

    ->> Fees for full course or package received in advance : Income does not accrue : CIT v. Dinesh Kumar Goel (Delhi) p. 10

    ->> Failure to file return of loss within time allowed in section 139(3) : Loss cannot be carried forward and set off : Joginder Paul (HUF) v. CIT (P&H) p. 31

    ->> Reassessment to recompute depreciation not valid : Hind Syntex Ltd. v. CIT (MP) p. 36

    ->> State Electricity Board having loss of Rs. 1,500 crores filing return in delay owing to bifurcation of State : CBDT ought to have considered Board's explanation : M. P. State Electricity Board v. Union of India (MP) p. 50

    ->> Land shown in revenue records as agricultural and no permission taken by assessee for conversion of land use : Gains from sale exempt : CIT v. Smt. Debbie Alemao (Bom) p. 59

    ->> Once assessment reopened, assessment to be made of such income and also any other which has escaped assessment : CIT v. Best Wood Industries and Saw Mills (Ker) p. 63

    ->> Mixing rubber with chemicals, process oil, etc. to make compound rubber for tyre manufacturing companies entitled to deduction u/s 80-IB : Midas Polymer Compounds P. Ltd. v. Asst. CIT (Ker) [FB] p. 68

    ->> Whether interest on delayed payments for job work eligible for deduction : Matter remanded : Midas Polymer Compounds P. Ltd. v. Asst. CIT (Ker) [FB] p. 68

    ->> Promoters of company having 51 per cent. of voting power even after change in shareholding resulted in their having less than 50 per cent. of the shares : Entitled to exemption u/s 10A in AY 2001-02 : Zycus Infotech P. Ltd. v. CIT (Bom) p. 72

    ->> Fees received for developmental work from foreign company intimately connected with manufacture and sale of goods : Fees could not be deducted in computing business profits : CIT v. Motor Industries Co. Ltd. (Karn) p. 79

    ->> Certified copy of instrument of partnership deed to be furnished if assessment was claimed in status of firm for any assessment year commencing from 1993-94, irrespective of whether assessee was assessed as firm up to 1993-94 : Bhaskar and Co. v. CIT (Ker) p. 90

    ->> Marble stones : Activities carried on by assessee amounts to manufacturing process : CIT v. Sophisticated Marbles and Granite Industries (Delhi) p. 96

    ->> Death of assessee : No abatement of appeal : CIT v. Smt. V. Rukmini (Karn) p. 102

    ->> Non-disclosure of capital gains : Reassessment notice valid : Smt. Maya Rastogi v. CIT (All) p. 116

    ->> Reassessment to give effect to finding or direction of appellate authority : No time limit applies but sanction of Joint Commissioner must be obtained : Smt. Maya Rastogi v. CIT (All) p. 116


    STATUTES AND NOTIFICATIONS

    ->> Notifications :

    Income-tax Act, 1961 : Notification under section 35(1)(iii) : Scientific research associations notified p. 2

    Income-tax Act, 1961 : Notifications under section 35AC, Expln., clause (b) : Eligible projects or schemes p. 5

    Income-tax Act, 1961 : Notification under section 80-IA(4)(iii) : Industrial parks notified p. 1

    Income-tax Act, 1961 : Notification under section 80-IB(10) : Corrigendum p. 2

    Income-tax Act, 1961 : Notification under section 90 : Avoidance of double taxation and mutual administrative assistance in tax matters among Governments of SAARC Member States : Gazette reference p. 5


    JOURNAL

    ->> Double deduction for depreciation and capital expenditure in case of charitable trusts-Whether justified ?--Dindayal Dhandaria, Chartered Accountant p. 1

    ->> Whether the rigours of clubbing of income of spouse as remuneration under section 64(1)(ii) applies to directors of companies and partners of firms--Kanhayalal Sharma, Advocate and Tax Consultant p. 17


    NEWS-BRIEF

    ->> Help centre on income-tax queries inducted at Finance Minister's constituency

    The Income-tax Department has, identified Finance Minister's constituency along with the National Capital Region, Jammu, Shillong and Kochi for setting up Aayakar Sampark Kendras to help answer your queries related to PAN card, grievances and filing of tax returns.

    The plan is to connect taxpayers with these centres which will have a cumulative seating capacity of 80 persons, with 40 located in the call centre in the NCR, which comprises Delhi, Gurgaon, Noida and Faridabad. The other centres-Jammu, Jangipur, Kochi and Shillong-will have 10 seats each to begin with. The tax Department is trying to rope in BPO or call centre operators to set up these inter-connected facilities where capacities can be scaled up. In addition, these operators will have to hire, train and manage tax relationship agents, who will answer queries of taxpayers.

    As part of its plan to offer improved services to taxpayers, the Government had already set up an Aayakar Sampark Kendra in Gurgaon (0124-24380000 ) a few years ago and now the capacity is being expanded by adding more centres.

    The call centres would be in addition to the Aayakar Seva Kendra (ASK), which is the single-window front office for filing all applications for services and redressal of grievances, including paper returns.

    The Government has earlier shown its intent to offer better services to honest taxpayers to facilitate payment of taxes and filing of returns. The tax return preparers scheme was started under which a trained individual helped people at the Aayakar Sampark Kendra. [Source : www.economictimes.com dated February 4, 2011]

    ->> DTAAs with SAARC nations to commence operation from April

    Taking forward its efforts to track and unearth blackmoney, India has now ratified its Double Taxation Avoidance Agreements with SAARC nations and the revised treaties will come into effect from next fiscal.

    The tax information exchange treaties amongst the South Asian Association for Regional Co-operation (SAARC) nations was struck first at Dhaka in 2005. The tax agreement, amongst SAARC countries-Bangladesh, Bhutan, Maldives, Nepal, Pakistan, Sri Lanka and India-was ratified by the SAARC Secretariat last April.

    "The Central Government hereby directs that all the provisions of the said agreement shall be given effect to by the Union of India with effect from 1st day of April, 2011," the official Government Gazette notification said. The new agreement will apply to persons who are residents of one or more member States.

    "On formalisation, this SAARC limited multilateral agreement on avoidance of double taxation and mutual administrative assistance in tax matters shall be applicable only in the member States where an adequate Direct Tax structure is in place.

    "Further, in case of a member State where such a structure is not in place, this agreement shall become effective from the date on which such a member State introduces a proper Direct Tax structure and notifies the SAARC secretariat to this effect," the Gazette notification added.

    At present, India is in the process of negotiating Double Taxation Avoidance Agreements (DTAAs) with 65 countries to broaden the scope of article concerning Exchange of Information, specifically regarding banking and taxpayers not covered by the said exchange treaty.

    He said DTAA and Exchange of Taxation Information Agreement are two instrumentalities under which information can be obtained and that the Government has already amended pacts with 23 countries to get information from various banks. [Source : www.economictimes.com dated February 4, 2011]

    ->> I-T Department to start investigations on global acquisition details

    The Income-tax Department has served a notice on a FMCG firm and its overseas parent company seeking details of its $19-billion global takeover last year. The notice follows a directive from the Finance Ministry after a public interest petition was filed in the Delhi High Court in 2010 claiming that parent company had "completely and illegally avoided" tax liabilities related to the sale of shares and capital assets in India.

    The move is the latest in a series of efforts by the Revenue Department to tax overseas deals, circumventing Indian tax laws.

    I-T officials confirmed the development. "An enquiry is on and we are in the process of collecting the details of the transaction," a senior official said.

    A spokesperson of the company however, sought to play down the significance of the notice.

    "The court has not granted any relief to the petitioner and has instead suggested to the petitioner to file a representation with the Government and the Indian tax authorities to take appropriate steps to respond to the queries raised, and is fully committed to complying with the Indian law and is responding to queries raised by the Indian tax authorities." Senior officials close to the development said the India business is a very small part of the overall global acquisition of FMCG company shares. [Source : www.economictimes.com dated February 1, 2011]

    ->> I-T slaps Rs. 1,180 crore more tax on the largest Realty Developer

    The Income-tax Department has sought Rs. 1,180 crore more tax from the country's largest real estate developer, and its 22 subsidiaries for the assessment year 2009-10.

    The group, which has filed an appeal with the appropriate appellate authorities, has not made any provision toward this demand in its third quarter result. The tax demand was raised in the previous quarter.

    "The company has made a significant investment in acquiring fresh land that has resulted in exceeding the capital expenditure by Rs. 500 crore for the third quarter," said another company official. "Due to fresh capital investment in land and the delay in new launches, net debt has witnessed a marginal rise in the quarter," he said. At the end of second quarter, the company had a debt of around Rs. 20,000 crore.

    The Realty developer reported marginal decline in consolidated net profit at Rs. 465.67 crore for the quarter ended December 31, 2010. The company had posted a net profit of Rs. 467.89 crore in the corresponding period previous fiscal, a company statement said. The consolidated sales during the quarter, however, increased by 22.42 per cent. to Rs. 2,479.93 crore from Rs. 2,025.77 crore in the year-ago period, it added. [Source : www.economictimes.com dated February 1, 2011]

    ->> I-T Department tip-off helps CBI nail the former telecom minister, aides

    The arrest of tainted former telecom minister and his associates by the Central Bureau of Investigation (CBI) was triggered by an Income-tax Department investigation on the money trail from a Mumbai-based realty firm to a Chennai-based company.

    They said the seized documents gave critical transaction details that took place after the allotment of 2G licences. Investigations revealed some of the group companies of the Mumbai-based realty firm transferred Rs. 209 crore to the company.

    Though the officials refused to share the names of the companies, they said the information compiled by the Department could be one of the reasons that led to former minister's arrest.

    I-T Department officials said they had found crucial links to the 2G scam from papers seized during a search in Mumbai 10-11 months earlier.

    A close scrutiny of the money trail by the Department revealed that Rs. 206 crore was subsequently given by the realty firm to a renowned event management company, understood to be close to a senior and influential politician-someone seen as a guiding force behind the realty company.

    Further investigations in the case revealed the money then changed hands from the event management company to a fruits and vegetables company that subsequently passed on the money to a Chennai-based company.

    Officials said the Department was in the process of establishing links to the former minister and his associates with this Chennai-based company but due to pressures from obvious quarters, the department was sitting on this investigation for quite some time. The arrest of the former minister and his associates might be just the first step towards a much wider action on the 2G scam. [Source : www.businessstandard.com dated February 3, 2011]



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