INCOME TAX REPORTS (ITR) HIGHLIGHTS ISSUE DATED 21-2-2011 Volume 331 Part 2
HIGH COURT JUDGMENTS
--> Limitation for provisional attachment : Department to show whether time extended as required under law : VLS Finance Ltd. v. Asst. CIT (Delhi) p. 131
--> Samiti set up by State Government entitled to registration u/s 12A : CIT v. Krishi Upaj Mandi Samiti, Jailsalmer (Raj) p. 135, CIT v. Krishi Utpadan Mandi Samiti (All) 154 and CIT v. Krishi Upaj Mandi Samiti, Shrimadhopur (Raj) p. 174
--> Market committee constituted statutorily with object of helping agriculturists and consumers entitled to registration u/s 12A : CIT v. Krishi Upaj Mandi Samiti (MP) p. 140
--> Seizure of jewellery not released on ground it did not belong to assessee alone where no proof that jewellery belonging to a third person : Matter remanded : Madhu Lalwani v. CIT (Delhi) p. 184
--> Interest on funds transferred from cash credit/packing credit not entitled to deduction : CIT v. Dhanalakshmi Weaving Works (Ker) p. 188
--> Revision on ground goodwill not an asset entitled to depreciation not valid : CIT v. Hindustan Coco Cola Beverages P. Ltd. (Delhi) p. 192
--> Assessee transferring residential house and purchasing four flats in the same residential building entitled to exemption u/s 54 : CIT v. Smt. K. G. Rukminiamma (Karn) p. 211
--> Cost of construction of property : Estimate based on relevant material justified : CIT v. Smt. V. Gajalakshmi (Mad) 216
--> AO allowing claim for depreciation without examining facts : Revision by Commissioner justified : CIT v. English Indian Clays Ltd. (Ker) 219
--> Reassessment proceedings on change of opinion on whether assessee engaged in manufacture not permissible : Northern Strips Ltd. v. ITO (Delhi) p. 224
--> Mercantile system of accounting : Interest accrued on non-performing assets not recognised as income : No accrual of income : CIT v. Coimbatore Lakshmi Inv. and Finance Co. Ltd. (Mad) p. 229
--> Duty draw back does not form part of net profit : Eastman Exports Global Clothing P. Ltd. v. Asst. CIT (Mad) p. 232
--> Power of AO to assess such other income only if income referred to in notice of reassessment has been assessed : CIT v. Jet Airways (I) Ltd. (Bom) p. 236
--> Recovery of tax : Tribunal finding karta had become a partner in his individual capacity : HUF property could not be attached : ITO v. Tippala China Appa Rao (AP) p. 248
--> High Court can condone delay in filing appeal : CIT v. R. K. B. K. Ltd. (Cal) p. 269
--> Assessee executing trust deed in 2000 starting activities in 2005 : Application belatedly filed as per advice of chartered accountant : Delay to be condoned : CIT v. Indian Gospel Fellowship Trust (Mad) p. 283
--> Plan to cure tax assessment limits of I-T officials'
In a significant organisational revamp, the Central Board of Direct Taxes has raised the monetary limit of tax assessments handled by income-tax officers or ITOs.
The move is designed to lighten the load on senior officers so that they can concentrate more on investigations, international taxation issues and transfer pricing. It also aims to ease the hardships of taxpayers in small towns and mofussil areas who have to travel to cities to attend to their tax matters.
Under the revised monetary limits, revenue cadre officials in metros will handle non-corporate taxpayers with an annual income above 20 lakh and corporates with an income above 30 lakh. In case of non-metros, they will deal only with non-corporate taxpayers with an annual income above 15 lakh and corporates with income over 20 lakh.
This is a big respite for taxpayers in small towns who until now had to travel to big centres where a Commissioner or an Assistant Commissioner usually has his office.
The Central Board of Direct Taxes has also finalised a strategic plan that includes creation of dedicated directorates for criminal investigation and risk management.
Resources freed up as part of this restructuring will be diverted to these specialised units. This will help in mounting an effective surveillance on fund flows into the country that have the potential to impact national security.
The country's direct tax revenues have grown from 13,000 crore in 1991-92 to 3.87 lakh crore in 2009-10. The number of taxpayers has also grown nearly five times over the period to more than 3.2 crore. [Source : www.economictimes.com dated February 5, 2011]
--> Tax cap ruling against evaders in line with litigation policy
The IT Department is mulling over development of an increase in limits above which it files appeals against tax evaders in the tribunal or courts.
"The Department is planning to change the tax limits for appeals. Now, for filing an appeal in Income-tax Appellate Tribunal (ITAT), the tax effect should be Rs. 3 lakh, for High Courts it has been increased to Rs. 10 lakh and for Supreme Court it is Rs. 25 lakh," the official said.
With the move, the Income-tax Department expects to reduce up to 13 per cent. cases at ITAT level and 25-30 per cent. cases at High Court and Supreme Court level each, the source added.
"Even if the case is strong enough to be taken to the Tribunal, the Department will not do so. This will cut down the wastage of resources in unnecessary litigation and reduce the burden of overburdened courts while at the same time assessee would also benefit from this policy," the official added.
According to the National Litigation Policy, the Government should work towards reducing litigation in courts so that valuable court time would be spent in resolving other pending cases. This will help in achieving the goal in the National Legal Mission to reduce average pendency time from 15 years to 3 years.
The initiative by the Income-tax Department comes in the backdrop of criticism by the Finance Minister that the I-T Department has emerged as the largest litigant in the country.
Last year, the Comptroller and Auditor General of India (CAG) had stated in its report that the disputed tax amount "can wipe off the revenue deficit of the Government in 2008-09".
The total amount of direct tax stuck at the Commissioner (Appeals) level is Rs. 2.2 lakh crore for 2008-09, the CAG had pointed out.
Apart from that, Rs. 12,757.59 crore is stuck at Income-tax Appellate Tribunal, Supreme Court and High Court levels, the Finance Minister had told the Parliament last year.
The move is to cut down wastage of resources in unnecessary litigation and reduce the burden of overburdened courts. [Source : www.financialexpress.com dated January 31, 2011]
--> Survey says to raise IT exemption limit to rough ride over inflation fears
The Government must increase the personal income tax exemption limit to at least Rs. 3 lakh from Rs. 1.6 lakh at present in the upcoming Budget for giving relief to taxpayers from high inflation, majority of CEOs surveyed by industry body ASSOCHAM has said.
"In view of the unprecedented inflation particularly the food inflation, the Government must increase the personal income-tax exemption limit from the existing Rs. 1.6 lakh to at least Rs. 3 lakh to give adequate relief to the larger sections of the society, added the majority of the CEOs," the pre-Budget survey said.
The Budget 2011-12 would be unveiled by the Finance Minister on February 28. At present, income up to Rs. 1.6 lakh is exempted from tax for individuals. For women and senior citizens, the limit is Rs. 1.9 lakh and Rs. 2.4 lakh, respectively.
The survey further said that due to continuous elevated inflation and high commodity prices across globe, there is a strong case for continuation of stimulus package so that the growth momentum is not spiked.
It was a pre-Budget expectations survey conducted under the Associated Chambers of Commerce and Industry of India (ASSOCHAM) with participation from its 1,000 CEOs. Inflation, particularly food inflation, has been a concern for both the Government and the common man. For the past few months, food prices are at high levels.
The WPI inflation for December rose to 8.43 per cent., from 7.48 per cent. in the previous month. Food inflation, based on wholesale prices, rose to 17.05 per cent. for the week ended January 22, on account of escalating vegetable prices, particularly, onions. It was at 15.57 per cent. in the previous week.
Around 84 per cent. of the CEOs belonging to large, micro, small and medium enterprises polled in the survey held that stimulus package for textiles, gems and jewellery, construction and real estate, cement and steel, among others, should continue for the next fiscal. [Source : www.economictimes.com dated February 6, 2011]
--> ASSOCHAM offers a neat way to enhance deduction on health insurance premiums
The Associated Chambers of Commerce and Industry of India (ASSOCHAM) in its pre-budget memorandum recommended that the deduction (under section 80D) in respect of medical insurance premium of an individual or his family should be raised to Rs. 25,000 from Rs. 15,000.
The rationale given by ASSOCHAM is "In the context of the sharply increasing medical expenses, medical insurance premiums are escalating every year. Also, there is need to increase the penetration ratio of insurance by providing encouragement through tax reliefs for opting for medical insurance." [Source : www.economictimes.com dated February 8, 2011]
--> Amendment in DTC is the best hope for CARE
Global agency CARE said the Government should amend the provisions of the Direct Taxes Code in the forthcoming Budget so that balances of non-profit organisation (NPOs) are not treated as income.
". . . retained balances of specific-purpose grants received by NPOs should not be treated as 'income' so long as it is applied for the specified purpose," CARE said in a statement.
It asked the Government that NPOs should be allowed to retain 15 per cent. of general contributions or other incomes to provide a buffer for ongoing activities.
"Considering that taxable income of the NPOs are computed largely on the same lines as commercial organisations, the DTC must also provide carry forward and set-off of deficit in any financial year against the surplus in subsequent years," the agency said. [Source : www.economictimes.com dated February 8, 2011]
--> Indian Merchants' Chamber offers Pre-Budget proposals
Indian Merchants' Chamber (IMC) has submitted its Pre-Budget Memorandum for the budget proposals for direct taxes and issues to the Prime Minister, the Finance Minister and the Chairman, C.B.D.T.
IMC says, in light of the measures proposed in the revised Direct Taxes Code (DTC) Bill, 2010 it is necessary that none of the proposals contained in the DTC should be introduced through the Finance Bill.
Some of the key recommendations explained in detail in the memorandum are listed below.
Retrospective Amendment Should Be Avoided
Definition of "Charitable Purpose" : Section 2(15)
Year of Deductibility Of Legitimate Business Expenditure-Reduce Avoidable Litigation
Exemption from T.D.S. for Regular Assessees
Disallowance of expenses relating to exempt income : Section 14A
Gifts etc. in kind to be treated as income : Section 56(2)
Failure to make claim for certain deductions in the return of Income : Section 80A(5)
Distribution of capital assets on dissolution of firm to partners : Section 45(4)
Stay of demand until disposal of the appeal, no recovery proceedings
Extension of the facility of advance ruling to domestic enterprises
Dispute Resolution Panel (Section 144C of Income-tax Act) [Source : www.economictimes.com dated February 10, 2011]
--> Constant agriculture sector incentives worrying the market
Industry chamber CII called for the Government to provide tax incentives on agricultural activities in the forthcoming Budget to encourage private participation and adoption of new technologies in the sector.
"CII has recommended encouraging private sector participation through various tax measures (in agriculture)," the industry chamber said in a statement. It said that additional tax incentives need to be given on expenses incurred on new technology and inputs.
CII also said the Government should incentivise best crop raising practices, soil testing, residue analysis and diagnostics. According to the Government's advance estimates, the output of the agriculture and allied sectors is likely to grow by 5.4 per cent. in 2010-11, compared to just 0.4 per cent. in 2009-10.
Experts said growth of the sector needs to be encouraged through calibrated Budget measures, as agriculture in India is primarily monsoon-dependent and any minor changes in rainfall patterns affect productivity and quality.
With regard to the infrastructure sector, CII hopes that the Union Budget presented on February 28 will help reverse the declining investment trend by introducing certain innovative fiscal measures.
"Emerging challenges such as rising input costs and interest rates amid still subdued global demand will have to be dealt with," CII's Director-General said.
The industry chamber also asked the Government to reduce the tax liabilities of infrastructure companies to motivate them to make larger investments. India needs a whopping USD 1 trillion investment in the infrastructure sector in the 12th Five-Year Plan (2012-17), of which it expects 50 per cent. to come from the private sector. [Source : www.economictimes.com dated February 8, 2011]
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