Thursday, August 25, 2011

ITR HIGHLIGHTS, ISSUE DATED 29-8-2011 Volume 336 Part 4

INCOME TAX REPORTS (ITR) HIGHLIGHTS

ISSUE DATED 29-8-2011

Volume 336 Part 4

 

SUPREME COURT JUDGMENTS

 

>  Partner signing return filed by firm at no point of time during assessment or penalty proceedings or in appeal therefrom disputing signature on return : Department need not prove signature in prosecution : ITO v. Mangat Ram Norata Ram Narwana p. 624

 

 

HIGH COURT JUDGMENTS

 

>  Weighted deduction u/s. 35(2AB) : Prescribed authority approving existence of R and D facility and expenditure incurred on such scientific research : Assessee entitled to expenditure incurred for whole of assessment year : CIT v. Wheels India Ltd. (Mad) p. 513

 

>  Income from investment of voluntary reserves entitled to deduction u/s. 80P(2)(a)(i) : CIT v. Andhra Pradesh State Co-operative Bank Ltd. (AP) p. 516

 

>  Error in mention of provision in notice would not invalidate search : Dr. V. S. Chauhan v. Director of I. T. (Investigations) (All) p. 533

 

>  Writ may not be issued where no reasonable explanation for delay : Dr. V. S. Chauhan v. Director of I. T. (Investigations) (All) p. 533

 

>  Block assessment of third person : Satisfaction that such other person had undisclosed income and forwarding of material to officer having jurisdiction : Failure : Assessment on other person not valid : CIT v. Sunil Bhala (Delhi) p. 550

 

>  Office note of AO regarding undisclosed income of third person : Notice under s. 158BD valid : CIT v. Mukta Metal Works (P & H) p. 555

 

>  Additional evidence necessary for deciding case : Duty of Tribunal to consider additional evidence : CIT v. Mukta Metal Works ( P & H) p. 555

 

>  Draft order to be sent to IAC having concurrent jurisdiction : CIT v. Saraya Sugar Mills P. Ltd. (All) p. 572

 

>  Revised statement accepted as such by AO and the revised statement submitted beyond time specified u/s. 139(5) and therefore invalid, not a ground for commencement of reassessment : Rotary Club of Ahmedabad v. Asst. CIT (Guj) p. 585

 

>  Transfer of know-how from UK company to Indian company : Agreement for complete transfer of know-how and not merely its use : Tax not to be deducted at source on such remittance : CIT v. D. C. M. Ltd. (Delhi) p. 599

 

>  Recovery proceedings against property standing in name of trust having three beneficiaries : Writ petition by only two beneficiaries not maintainable : Sagar Sharma v. Addl. CIT (Bom) p. 611

 

>  Failure to file Form 37-I by purchaser of immovable property : notice not necessary before launching prosecution : Rattan Singh Gupta v. State (Delhi) p. 629

 

>  Appeal from single order of Tribunal in a batch of cases : Single appeal to High Court maintainable : Director, I. T. (International Taxation) v. Transocean Offshore International Ventures Ltd. (Uttarakhand) p. 637

 

>  Agricultural marketing committee entitled to registration u/s 12A/12AA : CIT v. Agricultural Market Committee (AP) p. 641

 

 

STATUTES AND NOTIFICATIONS

 

>  From our Reporter at the Supreme Court :

 

Appeal to High Court : Nil tax effect p. 13

 

Block assessment : Determination of undisclosed income by estimation of cost of construction whether permissible p. 13

 

Carry forward of loss : Whether return of loss filed within time extended p. 13

 

Deduction of tax at source : Whether transaction of sale or works contract p. 14

 

Deduction of tax at source : Payment whether for contract work p. 14

 

Income : Interest on advances waived p. 14

 

Income : Remission of interest p. 14

 

Income : Business expenditure : Creation of statutory reserve under section 36(1)(viii) p. 14

 

Income or capital : Gains from repatriation of share capital raised outside India p. 15

 

Income or capital : Gifts received on birthdays and other occasions p. 15

 

Income-tax : General principles : Rule of consistency p. 15

 

Infrastructure facility : Special deduction p. 15

 

Manufacture : Assembling diesel generating sets p. 16

 

Penalty : Claim that loss not speculative, whether bona fide p. 16

 

Penalty : Claim to deduction whether furnishing inaccurate particulars p. 17

 

Unexplained investment : Genuineness of transaction, question of fact p. 17

 

Wealth-tax : Exemption in respect of land held for industrial purpose p. 17

 

>  General Circulars :

General Circular No. 41 of 2011, dated 6th July, 2011-E-filing of income-tax return in respect of companies under liquidation
p. 18

 

>  Notifications :

Income-tax Act, 1961 : Notification under section 10(6C) : Exemption of income for providing services in or outside India in projects connected with the security of India
p. 20

 

 

NEWS-BRIEF

 

>  Dearth of a Central bank policy on overseas investments

 

The Reserve Bank of India which decides on overseas investments in investing companies on a case-by-case basis, has written to the North Block, highlighting its concern about multi-layered structures of investments of Indian companies as they make tracking funds flow difficult. The Central bank has raised objections which can be a systemic risk related to setting up of special purpose vehicles or SPVs likely to be used to make onward investments in other countries. One, these SPVs float opaque structures, such as trusts, in tax havens. Two, they leverage domestic assets to give guarantees without informing RBI as required under the Foreign Exchange Management Act. There have also been cases where the Indian parent gave guarantees to its subsidiary abroad to enable it to borrow from foreign banks.

 

Sources said the Central bank has already become strict with companies when they come for approval to invest overseas. In a specific case, it told a company to collapse its multi-layered structure into two tiers before approving its proposal.

 

In May, the RBI had mandated that the parent company should own more than half of step-down operating subsidiary to be able to offer guarantee. But a number of companies have tried to get around the rule by floating SPVs, or holding companies, instead of operating company.

 

The new Companies Bill seeks to bar investment companies from having more than two tiers of subsidiaries, but it is not clear if this proposal will apply overseas. Multi-layered structures, especially through SPVs in tax havens, have come under the scanner, particularly after the inquiry into the Indian Premier League revealed a complex web of companies to route funds. The Central Board of Direct Taxes has proposed a new regime called Controlled Foreign Corporations in the new Direct Taxes Code to ensure that tax due to the exchequer is not lost. Under this regime, the undistributed dividends of foreign corporations controlled or owned by Indian companies will be added to the parent's income and taxed in India. [Source : www.economictimes.com dated August 19, 2011]

 

>  CBDT Chairman actively looking to improve the collection target

 

The Chairman of the Central Board of Direct Taxes (CBDT), has asked Income-tax (I-T) department officials to work without "fear or favour" to achieve this fiscal's tax collection target of Rs. 5.32 lakh crore although the task of achieving the target was difficult, nothing was "impossible".

 

He further called upon every member of the Aayakar parivar (I-T family) to take on the call of duty and put in their best efforts for the attainment of the revised target.

 

The CBDT Chairman said that being "futuristic and responsive" should be the hallmark of I-T officials while dealing with taxpayers.

 

The Chief Commissioners (CCsIT) of each region are expected to be the pioneers for their action plan targets pertaining to their respective regions, he said.

 

"In my task ahead, I will be consulting the CCsIT of each region who are the custodians of each region to find out ways and means to augment the revenue collection and render better taxpayer services," he added. [Source : www.businessstandard.com dated August 18, 2011]

 

>  Panel set up to scrutinise tax-related offences

 

"The Directorate of Income-tax (Criminal Investigation) is mandated to perform functions in respect of criminal matters having any financial implication punishable as an offence under any direct tax law," the Minister of State for Finance said in a written reply in the Lok Sabha.

 

The DCI, to be a part of the Central Board of Direct Taxes (CBDT), will seek and collect information about persons and transactions suspected to be connected with criminal activities "having cross-border, inter-State or international ramifications, that pose a threat to national security and are punishable under the direct tax laws", he said.

 

The directorate will also investigate the source and use of funds involved in such criminal activities.

In a separate reply, the Minister said the tax department is in the process of collating data on the indirect tax evasion by pharmaceutical companies.

 

"Investigations are currently underway and as such it would not be appropriate in the interest of investigation to divulge details of cases at this stage," the Minister said. [Source : www.businessstandard.com dated August 19, 2011]

 

>  GST gets IT criteria to reveal exposure to PAN as the unique identity

States have agreed to roll out the IT framework needed for the proposed goods and service tax (GST), raising hopes for an early resolution to the deadlocked discussions on the Government's efforts to reform the indirect taxes regime.

 

The rollout of an IT framework will allow traders all over the country to use their permanent account number, or PAN, as the tax identification number for all direct and indirect taxes in the country. "For the first time PAN will become a kind of unique identity for all taxes paid across the country," the chairman of the empowered group on IT infrastructure for GST, said.

 

A common identification number benefits not just taxpayers but also helps authorities keep tab on transactions by establishing links with other tax payments. Taxpayers would be able to register using their PAN and also be able to file a common return form.

 

The chairman of the empowered group on IT infrastructure for GST said a pilot of IT framework has already been launched in 11 States including Maharashtra, Karnataka and Gujarat, and now it would be implemented countrywide after the final approval.

 

IT infrastructure is crucial for the success of the proposed GST, which will replace a plethora of indirect taxes including excise duty, service tax, value-added tax, octroi. "Without a well designed and well functioning IT system, the benefits of GST will remain elusive," the empowered group had said in its report.

 

The Empowered Committee of State Finance Ministers has appealed for more flexibility from the Centre to ensure timely implementation of GST. "The Central Government will have to be flexible and address all concerns of State Governments," the chairman of the Empowered Committee of State Finance Ministers told reporters after the meeting of State Finance Ministers here.

 

Mr. Modi, who was last month elected new chairman of the panel, said it had decided to ask for compensation for the loss on account of phasing out of Central sales tax for 2010-11 and 2011-12 fiscal. [Source : www.economictimes.com dated August 20, 2011]

 

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