INCOME TAX REPORTS (ITR) HIGHLIGHTS
ISSUE DATED 15-8-2011
F Notice based on subsequent decision of High Court reversed by Supreme Court : Notice not valid : Commercial Co-operative Bank Ltd. v. ITO (Guj) p. 196
F Sales tax and excise duty not to form part of total turnover : CIT v. Falcon Tyres Ltd. (Karn) p. 200
F AO to consider membership fee payable to club whether revenue expenditure : CIT v. Falcon Tyres Ltd. (Karn) p. 200
F Part of tax deposited before request for time to pay taxes and entire amount paid subsequently : Prosecution not valid : Sushil Kumar Saboo v. State of Bihar (Patna) p. 202
F Presumptive taxation : No discussion in Tribunal's order regarding correctness of CIT (A) order : Matter remanded : Kesar Singh v. CIT (P&H) p. 205
F Tribunal finding price paid for raw materials not unreasonable : Part of price could not be disallowed : CIT v. V. S. Dempo and Co. P. Ltd. (Bom) p. 209
F Notice based on subsequent two-judge decision of Supreme Court which was overruled by a larger Bench : Notice not valid : Surat People Co-op. Bank Ltd. v. ITO (Guj) p. 218
F Legal position clarified in 1985 : Rectification based on SC decision in 1994 valid : Shahbad Co-operative Sugar Mills Ltd. v. Deputy CIT (P&H) p. 222
F Source of purchase of jewellery satisfactorily explained : Not undisclosed income of assessee : Sonia Magu v. CIT (Delhi) p. 227
F Duty drawback scheme : No accrual of income till claim of assessee quantified and verified by competent authority : CIT v. Sriyansh Knitters P. Ltd. (P&H) p. 235
F IPRS incentive received in next accounting year : Amount did not accrue and not assessable in AY 1993-94 :CIT v. Manav Tools (India) P. Ltd. ( P&H) p. 237
F Precise details about persons to be searched mentioned in warrant of authorisation : Search legal : Jose Cyriac v. CIT (Ker) p. 241
F Tribunal finding transfer of goods between units of same undertaking at market value : Section 80-I(8) not applicable : CIT v. Punjab Concast Steels Ltd. ( P&H) p. 248
F Cancellation of registration by order passed in March 2009 by Commissioner not valid : CIT v. Manav Vikas Avam Sewa Sansthan (All) p. 250
F Satisfaction regarding undisclosed income of such person recorded before completion of assessment of person searched : Assessment proceedings of third person valid : CIT v. Girdhari Lal Bassi (P&H) p. 255
F Tribunal finding there was no material from which concealment of income could be inferred : Penalty could not be imposed : CIT v. Careers Education and Infotech P. Ltd. (P&H) p. 257
F Bona fide claim for deduction not concealment or furnishing of inaccurate particulars : CIT v. Raj Overseas (P&H) p. 261
F Global distribution of services to airlines by NRI : Tribunal finding 15 per cent. of revenue accruing in respect of bookings made in India : Finding of fact : Director of I. T. v. Galileo International Inc. (Delhi) p. 264
F Small scale undertaking in rural area : AO denying relief on ground unit situate within fifteen kilometres from municipal limits not proper : CIT v. Friends Salt and Allied Industries (Guj) p. 272
F Part performance under agreement prior to amendment : No transfer giving rise to capital gains : CIT v. Rakesh Gupta (All) p. 277
F Trading in shares or investment : Two separate portfolios permissible : CIT v. Gopal Purohit (Bom) p. 287
F No satisfactory explanation of investment : Addition justified : Hazari Lal v. CIT (P&H) p. 290
F Gift discovered to be bogus : Penalty leviable : CIT v. Deep Chand ( P&H) p. 292
F Details furnished by assessee supported by material documents : Assessee entitled to relief u/ss. 32A and 80-IA : CIT v. Aicam Engineering P. Ltd. (Mad) p. 294
F Undertaking by managing director to get additional income surrendered by assessee but not declared in return by assessee : Levy of penalty justified : Shveta Nanda v. CIT (P&H) p. 298
F Procedural requirement complied with : Assessee to be assessed in capacity of a firm : CIT v. Nand Lal Labhu Ram ( P&H) p. 303
F Amount of gifts almost equal to difference in gross profit declared : Gifts received undisclosed income of assessee : CIT v. Deepak Iron and Steel Rolling Mills ( P&H) p. 307
F Provision that income-tax payable by MLA on salary and allowance will be paid by State : Law within competence of State Legislature : Manmohan Singh v. State of Punjab (P&H) p. 312
F Book profits : Losses brought forward deductible : CIT v. Sumi Motherson Innovative Engineering Ltd. (Delhi) p. 321
F No discussion on material justifying enhancement : Matter remanded : Aggarwal Engineering Co. v. Asst. CIT ( P&H) p. 332
F C. B. D. T. Circulars : Circular No. 4 of 2011, dated 19th July, 2011-Prior permission under section 281 of the Income-tax Act, 1961 to create a charge on the assets of business-Issuance of guidelines p. 1
F Notifications : Income-tax Act, 1961 : Notifications under section 120(1) and (2) : Jurisdiction of Income-tax authorities : Amendments p. 10
Tax cannot be levied on an amount wrongly paid to a person because of a mistake made by the payer, according to a recent order by a division bench of the Income-tax Appellate Tribunal (ITAT).
In this case, the taxpayer company, Tata Investment Corporation, moved the ITAT after it was levied tax on dividend it received on the shares it had already transferred to other entities. The taxpayer is a non-banking finance company. Since the transfer of shares was not entered in the records of the company whose shares were sold by taxpayer company, the dividend for a particular year was wrongly issued to the taxpayer company.
In its order on July 15, ITAT pointed out that section 72 of the Indian Contract Act, 1872 stipulates that a person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it and therefore amounts received by the mistake of the paying party cannot be construed as income of the receiver and therefore not liable to be taxed.
All income cannot be taxed, but only those incomes on which the taxpayer has a legitimate and enforceable right is liable to tax, the ITAT held. The ITAT held that income can be considered "accrued" only when the taxpayer has a right to receive the income. Without a legally enforceable right, there cannot be an accrual of income. [Source :www.economictimes.com dated August 5, 2011]
F Government promote convenience of tax offices in foreign countries
Under pressure to bring back unaccounted money stashed abroad, the Government said it will set up tax overseas units in eight countries, including the US, France and Germany, this financial year.
"The proposal is being processed and (eight) Income-tax Overseas Units (ITOUs) are likely to be set up within the present financial year 2011-12," the Minister of State for Finance told the Lok Sabha in a written reply.
Cyprus, Japan, UK, the Netherlands and United Arab Emirates are the other countries where the Government wants to establish ITOUs.
The Government, the Minister said, had earlier set up ITOUs at Mauritius and Singapore.
He said the Government has framed a five-pronged strategy to fight the menace of tax evasion that include joining hands with international bodies like G-20 and United Nations, besides forming appropriate legislations, setting up domestic institutions, and manpower training.
The Government has also approved the cadre restructuring of the Directorate of Enforcement for increasing its effectiveness in implementing the provisions of the Prevention of Money Laundering Act and the Foreign Exchange Management Act.
"The approval includes increase in staff strength from 745 to 2,064 and the number of offices from 22 to 39. This is likely to involve an expenditure of about Rs. 60 crore annually. The restructuring process of the Directorate of Enforcement is likely to be completed in 2-3 years," the Minister said.
The Minister also informed Lok Sabha that Government has commissioned a study to estimate the quantum of unaccounted wealth, both inside and outside the country, and its ramifications on the national security based on recommendations of the Standing Committee on Finance. [Source : www.economictimes.com dated August 5, 2011]
F Government reviewing DTAA with Mauritius for wider tax awareness
The Government is working to review the Double Taxation Avoidance Convention (DTAC) with Mauritius to further strengthen its provisions and have better exchange of information on tax matters with the island nation, which accounts for almost 36 per cent. of FDI inflow to India.
In a written reply to the Lok Sabha, the Minister of State for Finance said the Government has proposed to review the India-Mauritius DTAC to incorporate appropriate changes in the agreement for prevention of treaty shopping and to strengthen the mechanism of exchange of information of tax matters between the two countries.
"There was unwillingness on the part of Mauritius to cooperate in addressing this problem. However, recently it was agreed to convene the next meeting of the joint working group on the DTAC. We have now proposed next round of discussion to which Mauritius is yet to respond," the Minister said.
Mauritius contributed to 35.96 per cent. of the total Foreign Direct Investment (FDI) that came to India in 2010-11. It was 40.16 per cent. in 2009-10 and 41.01 per cent. in 2008-09.
"Accurate estimate of the volume of alleged 'revenue loss' is difficult as the tax on capital gains depends on the difference between the sale and purchase prices, factor of cost inflation index, cost of transfer, the set off of loss suffered in one transaction against the gains in the other and the carried forward losses of earlier years," he said.
He was replying to a question of whether the Government had found some loopholes and revenue leakages in the DTAA with Mauritius.
"Since the tax on capital gains from Mauritius-based entities was exempt, a large number of them did not file the returns unless they had other streams of income as well. The exact amount of revenue loss due to non-taxation of capital gains cannot be quantified," the Minister said.
The India-Mauritius DTAA provides for taxation of income from capital gains arising from sale of shares only in the country of residence of the investor.
Therefore, an investor routing his investments through Mauritius into India does not pay tax on capital gains here.[Source : www.economictimes.com dated August 5, 2011]