Thursday, May 5, 2011

ITR Highlights Val 333 Part 3 dated 09-05-2011

ISSUE DATED 9-5-2011
Volume 333 Part 3



>> No transaction of purchase and sale of shares in accounting year : Loss in book value of shares constitutes loss in speculation business : Prasad Agents P. Ltd. v. ITO (Bom) p. 275

>> Search in premises of partner : Same AO having jurisdiction over partner and firm : Notice to firm u/s 158BD read with 158BC sufficient : CIT v. Panchajanyam Management Agencies (Ker) p. 281

>> Housing project approved by local authority having residential and commercial units : Prior to 1-4-2005 entire profits entitled to deduction u/s 80-IB : CIT v. Brahma Associates (Bom) p. 289

>> Foreign company engaged in turnkey projects : S 44BBB applicable : Director of I. T. v. DSD Noell GMBH (Delhi) p. 304

>> Special audit : AO has power to specify period for audit report : CIT v. Popular Automobiles (Ker) p. 308

>> Block assessment of third person : No satisfaction recorded : Proceedings u/s 158BD not valid : CIT v. Raj Pal Bhatia (Delhi) p. 315

>> Assessee not claiming deduction for initial years : Does not disentitle assessee to claim benefit for remaining years if conditions are satisfied : Praveen Soni v. CIT (Delhi) p. 324

>> Excise duty refund and interest subsidy capital receipt : Shree Balaji Alloys v. CIT (J & K) p. 335

>> Investment in chit fund in accounting year preceding assessment year for which exemption sought : Denial of exemption for assessment year justified : Priyadarshini Educational Academy v. Director General of Income-tax (Investigation) (AP) p. 347

>> Sales tax collected in March 1985 and paid in April 1985 : Amount not deductible : CIT v. P. Glass Works (All) p. 355

>> Government subsidy not part of actual cost : CIT v. P. Glass Works (All) p. 355

>> No dispute regarding depreciation at 15 per cent. allowed by AO : Rate could not be reduced by High Court : CIT v. P. Glass Works (All) p. 355

>> Opportunity given to assessee and time therefor extended : Failure to produce material particulars : Best judgment assessment not void ab initio : V. Lakshmi Reddy v. ITO (Mad) p. 359

>> Expenditure incurred for rectifying defects in title to property and removing encumbrance to transfer : Issue not raised before Tribunal : Assessee to be given opportunity to substantiate claim : V. Lakshmi Reddy v. ITO (Mad) p. 359

>> Income allegedly escaping assessment subject-matter of appeal : Reassessment not valid : Prashant Projects Ltd. v. Asst. CIT (Bom) p. 368

>> Intimation for change of address but notice informing date of hearing sent to old address and returned: Appeal dismissed for absence of assessee : Breach of natural justice : Jagjivandas Nandlal and Co. v. ITAT (Bom) p. 374

>> Question whether sales were genuine considered by AO, CIT(A) : Tribunal could not reduce sale price : S. A. Rahim v. CIT (AP) p. 379

>> Waiver of loan taken by assessee for business activity assessable as business income : Logitronics P. Ltd. v. CIT (Delhi) p. 386

>> Remission of liability : No deduction claimed in respect of loan : Not income : Logitronics P. Ltd. v. CIT (Delhi) p. 386

>> Information regarding search : Right to Information Act not applicable : MD Overseas Ltd. v. Director of I. T. (All) p. 407

>> Search in SEZ area in September 2009 : SEZ Act not applicable : MD Overseas Ltd. v. Director of I. T. (All) p. 407

>> Assessee having several businesses elsewhere and warehouse in Noida : Director of IT, Kanpur had jurisdiction to authorise search : MD Overseas Ltd. v. Director of I. T. (All) p. 407

>> Prima facie case made out against search : Assessee entitled to know reasons for search : MD Overseas Ltd. v. Director of I. T. (All) p. 407


>> C. B. D. T. Circulars :

Circular No. 2 of 2011, dated 27th April, 2011-Procedure for regulating refund of excess amount of TDS deducted and/or paid-Regarding p. 81

>> Rules :

Income-tax (Second Amendment) Rules, 2011 : Gazette reference p. 83

Income-tax (Fourth Amendment) Rules, 2011 : Gazette reference p. 83

>> Notifications :

Income-tax Act, 1961 :

Notifications under section 10(23C)(vi) :

Approved institutions p. 88

Notification under section 35AC(1) Expln., clause (b) :

Eligible projects or schemes p. 89

Notification under section 35(1)(ii) :

Scientific research associations p. 83

Notification under section 80C(2)(xii) :

Annuity plan : Corrigendum p. 82


>> Whether more latitude to Government in condonation of delays in court cases is justified ? (T. N. Pandey, Retd. Chairman, CBDT) p. 22


>> Revenue Department to reopen bona fide proceedings on incomes overlooked earlier

The Delhi High Court has ruled that reopening of the assessment by the Income-tax Department is legal where no return has been filed by the assessee for the assessment year in dispute. The court rejected the plea on the grounds that the income of the assessee was assessed and appropriate orders were passed which cannot be reopened on the ground of change of opinion of the Assessing Officer.

The assessee-company was awarded four contracts encompassing onshore supply, onshore services and offshore supply of the equipment. The contracts for onshore supply and onshore services were given on sub-contract to the assessee at the same price at which the said contracts were awarded to the petitioner-company, who, had moved an application under section 195(2) of the Income-tax Act, 1961 with regard to the payments to be made to the assessee. The Revenue passed orders for tax deduction only in respect of the payments made to the petitioner-company on offshore contract and onshore services contract at 10 per cent. on gross basis in respect of the payment made for training charges and 10 per cent. on gross basis in respect of the payments made for maintenance and service charges respectively and on other payments, deduction was to be made at nil rate.

The petitioner-company had been regularly filing applications under section 197(1) of the Act with regard to the payments to be made under various contracts and the Revenue Department had been issuing certificates for tax deduction at source. [Source : dated April 26, 2011]

>> Exemption for salaried class on returns to be notified shortly

The scheme announced in the Union Budget 2011-12 by the Finance Minister to exempt salaried people earning up to Rs. 5 lakh annually from filing income-tax returns will be notified in the first week of June.

"A category of small-salaried taxpayers whose net salaried income is not above Rs. 5 lakh and whose tax is deducted at source by the employer who files return, will be exempted from filing returns", Chairman, CBDT told reporters.

The scheme will provide relief to about 70 to 80 lakh people from filing income-tax returns and exempt small bank-interest income, the tax on which has been deducted at source.

"A new facility has been introduced on filing of electronic returns. At the click of the mouse, a portal will open on which you can view every month how much money your employer has deducted, and whether it has been deposited in the Government kitty", the chairman added. [Source : dated April 23, 2011]

>> Income-tax refunds to start in fiscal year beginning

The Income-tax Department will refund about Rs. 40,000 crore by the end of April or early May, as part of the initiative by the Central Board of Direct Taxes (CBDT) to complete the entire refunding process in the very first month of a fiscal year.

This initiative comes as a big relief to taxpayers who earlier received refunds only in the last three months of a fiscal. The timely refund will also help the tax Department save the interest it paid on the amount-at the rate of 1 per cent. per month.

Sources in the Income-tax Department said a major chunk of the refund dues have already been released.

The initiative, though taxpayer-friendly, was not without any resistance. Income-tax employees were unprepared to adjust to the sudden shift in focus from tax collection to refund distribution, given the prevailing constraints, including severe manpower shortage. However, a meeting in New Delhi last week between the representatives of the employees and the CBDT chairman resolved the conflict and the employees' unions gave their full support to the exercise.

The initiative for early completion of refunding came in the backdrop of a more than 20 per cent. increase in tax collection the last year. In fact, it was the first time in the last three years that the direct tax collection exceeded the revised target. [Source : dated April 27, 2011]

>> Income-tax Department seeks DGCA for correlation on the ownership details of private jets in India

The Income-tax Department has asked the Directorate-General of Civil Aviation for ownership details of private jets in the country. It has also sought information from the Directorate of Revenue Intelligence on Customs clearances given to aircraft, luxury yachts and flashy sports cars.

"Despite an increase in possession of such items, wealth-tax collections have largely remained stagnant over the past several years", an Income-tax Department official said, explaining the rationale for an investigation.

"We believe there is a need for a deeper investigation on this count", he said.

The fast-growing Indian economy has seen the emergence of a large number of billionaires who can afford such luxury items. There were 335 private planes in India in 2006-170 fixed-wing planes and 165 helicopters. In 2010, the number rose to 552 - 270 fixed-wing planes and 282 helicopters.

The Income-tax Department will closely monitor wealth-tax and income-tax returns of individuals who own private jets, yachts and sports cars. The Department will use the data on such purchases in its drive against black money and to scrutinise returns of companies that own high-value luxury items as it has come across instances of high net-worth individuals purchasing aircraft through their companies. [Source : dated April 30, 2011]

>> India, Mauritius agree on joint working group on double taxation

Amid growing concerns over flow of black money into the country, India and Mauritius have agreed on convening a meeting of joint working group to renegotiate 28-year-old Double Taxation Avoidance Agreement (DTAA) treaty between the two countries.

This was stated by President Pratibha Patil while talking to reporters on board the special plane during her return from the five-day visit to the island nation.

While terming her visit to this country as a success which ensured "deeper, strengthened and more diverse partnership", the President said Mauritius expects India to play an important role "which we are ready to fulfil".

Listing the highlights of the visit, she said her discussions focused on a diverse range of issues covering multi-sectoral and vibrant bilateral partnership.

"While expressing satisfaction over the current state of our relations, we did feel that the already considerable and growing opportunities could be exploited particularly in the area of trade and economic co-operation".

"It was agreed to convene the next meeting of the Joint Working Group on the Double Taxation Avoidance Convention", she said.

President's comments assume significance in the backdrop of growing demand from Finance Ministry to re-negotiate the 1983 tax treaty with Mauritius so that India could have access to banking details besides tax related information.

Re-negotiation includes specific provision of sharing of banking information and also an article on assistance in collection of taxes. Mauritius accounts for nearly 44 per cent. of Foreign Direct Investment (FDI) into the country.

Security agencies have been raising concerns over use of the Mauritian route to pump in black money into India especially in the telecom and real estate sectors, and the visit will provide a greater momentum and thrust to our partnership. [Source : dated April 29, 2011]


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