Saturday, August 27, 2011

ITR (Trib) HIGHLIGHTS ISSUE DATED 29-08-2011 Volume 11 Part 1

ISSUE DATED 29-08-2011
Volume 11 Part 1

>> Search and seizure : Amounts disclosed in returns of third person additions not valid : Asst. CIT v. Bhagwan Prasad (Ranchi) p. 1

>> Interest awarded by High Court, capital receipt : Sushil Kumar Das v. ITO (Kolkata) p. 17

>> Where loan not out of accumulated surplus of accounting year, exemption cannot be denied u/s. 11 : Kanpur Subhash Shiksha Samiti v. Deputy CIT (Lucknow) p. 23

>> Where claim for loss on sale of units against other taxable income, relevant particulars and basic facts required u/s. 94(7) not disclosed in return, penalty leviable : Survidhi Financial Services Ltd. v. Asst. CIT (Delhi) p. 49

>> Modification of wooden partitions and work stations in premises taken on lease are temporary structure, eligible for 100 per cent. depreciation : Deputy CIT v. Win Medicare Ltd. (Delhi) p.66

>> Where assessee cannot be compelled to provide for depreciation in books of account, deduction of interest payment made to partners to be allowed : Swaraj Enterprises v. ITO (Visakhapatnam) p. 70

>> Tippers, vibrators, vibrator soil compactor are commercial vehicles, higher rate of 40 per cent. depreciation allowable : Deputy CIT v. Rakesh Jain (Chandigarh) p. 82

>> Question referred to Special Bench pending consideration before High Court not precluded from deciding reference : Deputy CIT v. Summit Securities Ltd. (Mumbai) [SB] 88

>> Where addition not made on basis of any evidence found during search, penalty cannot be imposed : Beena Rani v. Deputy CIT (Delhi) p. 106


>> 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 : 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 income-tax 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 : 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 : dated August 20, 2011]

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