S. 54EC limit of Rs. 50L does not apply to the transaction but financial year.

 

Aspi Ginwala vs. ACIT (ITAT Ahmedabad)

S. 54EC limit of Rs. 50L does not apply to the transaction but financial year. Delay in investing within 6 M owing to non-availability of bonds to be excused

The assessee sold property on 22.10.2007 and computed long-term capital gains. The s. 54EC investment was required to be made within 6 months i.e. on or before 21.04.2008. The assessee invested Rs. 50 lakhs in REC bonds on 31.12.2007 (FY 2007-08, within the 6 M time limit) and Rs. 50 lakhs in NHAI bonds on 26.5.2008 (FY 2008-08, beyond the 6 M time limit) and claimed a deduction of Rs. 1 crore. The assessee claimed that no eligible scheme was available for subscription from 1.4.2008 to 28.5.2008 and that he applied in the NHAI bonds as soon as it opened and that he was prevented by sufficient cause from investing within the time period of 6 months. The AO & CIT (A) rejected the claim for exemption of Rs. 50 lakhs in respect of the NHAI bonds on the ground that (i) it exceeded the monetary limit of Rs. 50 lakhs prescribed in s. 54EC and (ii) it was made beyond the time limit of 6 months. On appeal to the Tribunal, HELD allowing the appeal:

(i) The Proviso to s. 54EC provides that the investment made in a long term specified asset by an assessee "during any financial year" should not exceed Rs. 50 lakhs. It is clear that if the assessee transfers his capital asset after 30th September of the financial year he gets an opportunity to make an investment of Rs.50 lakhs each in two different financial years and is able to claim exemption upto Rs.1 crore u/s 54EC. The language of the proviso is clear and unambiguous and so the assessee is entitled to get exemption upto Rs.1 crore in this case;

(ii) Though the time limit of 6 months for making the investment u/s 54EC expired on 21.4.2008, no bonds were available for subscription between 1.4.2008 to 28.5.2008. The investment was made as soon as the subscription opened on 26.5.2008. The assessee was accordingly prevented by sufficient cause which was beyond his control in making investment in these Bonds within the time prescribed. Exemption should be granted in cases where there is a delay in making investment due to non-availability of the bonds (Ram Agarwal 81 ITD 163 (Mum) followed)

See the contra view in ACIT vs. Raj Kumar Jain & Sons (HUF) (ITAT Jaipur)

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Whether expenses incurred on corporate film-making is revenue in nature?

 

Income tax - Whether expenses incurred on corporate film-making is revenue in nature - YES, rules ITAT

MUMBAI, NOV 24, 2011: THE issues before the Bench are - Whether corporate film making charges are akin to sales promotion and hence the same are allowable as revenue expenses - Whether, for claiming an amount as bad debt, it is necessary to establish that such an amount is of revenue character. And the verdict partly goes in favour of the assessee.

Facts of the case

Assessee is a company engaged in the business of manufacturing and repairs of specialized motors. It claimed the deduction of corporate film making expenses and claimed write-off of certain bad debts. During the course of assessment proceedings the AO observed that the expenses of corporate film-making provided enduring benefits to the assessee and hence the same were capital in nature. The AO also denied the claim of right of bad debts on the ground that the advances made by the assessee were capital in nature and hence the write-off of the same was not permissible. CIT (A) allowed the appeal of the assessee. Before the ITAT, the DR pointed out that the advances made by the assessee company were inter-corporate deposits and hence the same activity cannot be regarded as regular activity of business.

After hearing the parties ITAT held that,

++ we find that the categorical finding of the CIT(A) is that "it has been held in various decisions that the expenditure incurred in making of advertisement film is an expenditure of revenue in nature." Therefore, we find no infirmity in the order of CIT(A) deleting the disallowance of Rs. 1,25,000/- made by the AO on account of corporate film making charges treating the same as revenue expenditure. Accordingly, this ground of appeal of the revenue is dismissed;

++ the AO has observed in the assessment order that interest accrued on inter-corporate deposits in the past also not shown as business income. Whereas the learned CIT(A) has observed that income on inter-corporate deposits was duly offered for taxation by the assessee in the preceding years. He gave a finding that the placement of inter-corporate deposits was in the normal course of business. In view of the above contradictory findings given by the authorities below, we set aside the order of the CIT(A) and remit the matter back to the file of the AO to examine the issue whether interest received on inter-corporate deposits offered for taxation as business income or not, whether placement of inter-corporate deposits was the normal course of business or not and decide, the entire issue pertaining to addition of Rs. 58,03,193/- consisting of advance made to suppliers at Rs 70,367/- and inter corporate deposit placed with Alpic Finance Ltd. Rs. 48,00,000/-, amount not recovered from debtors Rs. 72,552/- and accrued interest on inter-corporate deposits Rs. 8,60,274/-, de-novo after providing reasonable opportunity of being heard to the assessee in the matter.

Whole of share capital being held by holding company as required under secti

 

IT: Whole of share capital being held by holding company as required under section 47(v) is not same thing as whole of share capital being held in name of holding company

[2012] 20 taxmann.com 201 (Bombay)
HIGH COURT OF BOMBAY

Commissioner of Income-tax

v.

Papilion Investments (P.) Ltd.*

Assessing Officer, having not imposed penalty under section 271B while proc

 

IT : Assessing Officer, having not imposed penalty under section 271B while processing original return under section 143(1)(a), cannot impose such penalty while finalizing assessment in response to notice under section 148

[2012] 20 taxmann.com 202 (Punjab and Haryana)
HIGH COURT OF PUNJAB AND HARYANA

Jasbir Singh

v.

Commissioner of Income-tax Patiala*

Subsequent decision of SC, overruling its earlier decision, will be law of land with retrospective effect.

Subsequent decision of SC, overruling its earlier decision, will be law of land with retrospective effect.
   
The Tribunal, on the basis of Supreme Court's judgment in the case of Virtual Soft Systems Ltd. v. CIT [2007] 159 Taxman 155, held that no penalty for concealment can be imposed under section 271(1)(c) if there is no tax payable by assessee. Subsequently, said judgment was overruled by the higher bench of the Supreme Court in CIT v. Gold Coin Health Food (P.) Ltd. [2008] 172 Taxman 386 (SC).
Revenue sought for successful rectification of the order of the Tribunal on the basis of the later decision of the Supreme Court. The assessee preferred writ petition against such rectification order of the Tribunal and contended that the later decision of Supreme Court doesn't make the earlier decision of tribunal erroneous.
The High Court held that where a decision of the Supreme Court overruled its earlier decision, the views expressed in the later decision would have to be regarded as having always been the law of land and that too with retrospective effect. Therefore, it held that the order of tribunal rectifying its earlier order was valid - LAKSHMI SUGAR MILLS CO. LTD. v. CIT [2012] 22 Taxman 300 (Delhi)

Retrospective Amendment - Beneficial to Assessee

 

Retrospective Amendment - Beneficial to Assessee
By CA Pradeep Jain, CA Preeti Parihar & Manish Vyas

IT is said by many learned authors that the Government has used the weapon of retrospective amendment to nullify the Court's ruling. This is being used against the manufacturers. But this time the Government has proved that the same is wrong. A number of retrospective amendment has been done in this budget also but all in favour of the assessee. We are discussing these amendments in this article one by one:-

Issue

Amendment

According to Rule 6(1) of the Cenvat Credit Rules, 2004, the Cenvat credit is not allowed on such quantity of input which is used in or in relation to the manufacturer of exempted goods or for provision of exempted services. If common inputs/input services are used for providing both exempted and taxable services or manufacturing both dutiable or exempted goods; credit will be allowed if separate records are maintained or proportionate reversal is done or an amount @ 6%/5% is paid at the time of removal of exempted goods or providing of exempted services.

But as per Rule 6 (6) of Cenvat Credit Rules, the provision of Rule 6 is not applicable in cases of some exempted clearances/services, for e.g. clearance to 100% EOU. Services provided to SEZ without payment of service tax were added in rule 6(6) w.e.f. 1.4.11. As such, prior to this date, provisions of rule 6(6) are not applicable in the case of services provided to SEZ. Hence the reversal is to be done prior to this date. The department has demanded duty from the service providers in this regard. But this was not the intention. Hence the Rule 6(6) was amended by the Board. But the department said that the aforesaid notification is applicable from the date of issue. Hence the demand for the prior period is sustainable and the service provider should reverse the cenvat credit.

Now retrospective amendment is made in respect of services provided to SEZ. With this amendment, "Providing of taxable service without payment of service tax" will be exempted from the formalities of rule 6 even before 1.4.2011. Hence the demand issued by the department will be dropped.

2. Issue

Amendment

With effect from 25 July, 2011 the exemption is given to the service related to setting of common facilities for treatment and recycling of effluents and solid waste vide notification no. 42/2011-ST. This exemption was highly appreciated as it was in public interest. The Gujarat High Court has also held in case of Green Environment services co-operative society Limited v. Union of India [2009(3)STR250(Guj.)] that the work undertaken by the party is of public interest and they should approach the central government for exemption and the government should consider the same. Thereafter, the Board has given the exemption from this date. But again the department said that the same is applicable from the date of its issue and it is not applicable for the earlier period.

Now, government has brought a retrospective amendment in the said notification. Now the benefit of this notification is available in respect of services provided after 16 June 2005. After passing of the budget, the department will drop the proceedings initiated in this regard. This is also welcome step on the part of Government which shows that the Government is not pro-revenue as is normally said.

3. Issue

Amendment

The construction of road was excluded from the purview of service tax under Commercial construction service. As the definition of commercial construction does not include the road construction. But it was in the dispute whether the repairs of Road will chargeable to service tax when the construction of road itself is excluded. A lot of litigation went on the same. Even the Board has clarified vide circular number 110/4/2009-ST dated 23.2.2009 on the same point that certain work done will be treated as construction of road and other will be treated as repairing of road. The repairing of road will fall under Management, maintenance and repair service and there is no exemption under the aforesaid service. Hence the same is chargeable to service tax. But this was not the intention of the Government. Hence, exemption under notification 24/2009-ST dated 27 th July 2009, amendment was made and Repairs of Road was excluded from levy of service tax. But the litigation continued for the past period.

Now, retrospective amendment has been made in respect of services provided in relation to repairs of road. The effect of this amendment is that the service related to repairs of road provided before 27 th July 2009 and after 16 th June 2005 will also be exempted now. Once again Government has proved that they are trade friendly.

4. Issue

Amendment

The earlier dispute was that whether the exemption will allowed on the service related to Management, Maintenance or repair service in relation to non-Government Buildings?

Retrospective amendment has been made in this regard and now service related to Management, Maintenance or repair service in relation to non-Government Buildings provided after 16 th June 2005 will be exempt. However, this amendment has limited affect till the new scheme of service tax by negative list is implemented. The new scheme will exempt this service by some another notification. But all these amendments have changed the face of Government and it is proved that they do the things which are right whether these are in favour of assessee or the revenue.

With all these retrospective amendments in service tax whereby the relief is granted to the service providers, it is proved that the Government will do the right thing. These all steps of present Government have increased the faith in the minds of the service industry. We welcome these steps. The field formation should also take a lesson from these steps and amend their approach and become friendly with trade and industry. They should not raise the huge demands on assessee on small technical points.

Fact that procedure envisaged by section 153C is somewhat cumbersome and tha

 Fact that procedure envisaged by section 153C is somewhat cumbersome and that person other than searched person is put to some inconvenience cannot be an argument to hold that entire proceedings are bad in law

• There can be some inconveniences in a case where income had already been disclosed by other person who has not been searched; however, there is no cause for any apprehension that income tax authorities will exploit situation to harass assessees where there is evidence adduced by them to show and establish that income reflected by valuable article or books of account or document seized during search has already been disclosed by them; even if they tend to act unreasonably or under misplaced enthusiasm, there are adequate safeguards which can be availed of by those persons

• If AO having jurisdiction over searched person reaches satisfaction that document belongs to a person other than searched person, it is not necessary for him to also reach a firm conclusion/ opinion that document shows undisclosed income belonging to such other person; that is a matter for enquiry, which is to be conducted in manner prescribed by section 153C

[2012] 20 taxmann.com 214 (Delhi)
HIGH COURT OF DELHI

SSP Aviation Ltd.

v.

Deputy Commissioner of Income-tax

Transfer Pricing - Prescribing a Proforma for Obtaining Information - Suggestions Invited from Officers ing Information

 

Income Tax - Transfer Pricing - Prescribing a Proforma for Obtaining Information - Suggestions Invited from Officers

INFORMATION on tax matters is being sought by field officers of the Income Tax Department from countries/jurisdictions with which India has Double Taxation Avoidance Agreement (DTAA) or Tax Information Exchange Agreement (TIEA) under the relevant 'Exchange of Information' Article of DTAA/TIEA through the office of competent authority viz. the Joint Secretary in the Foreign Tax ; Tax Division, CBDT;

At present, the above information is being sought in a prescribed checklist/ proforma (Annexure-A). Further in the case of U.K, for obtaining banking information, a separate proforma has been prescribed by U.K tax authorities (Annexure-B).

Considering the developments at International Forums including the Model Proforma for the exchange of information being developed by the OECD, it is proposed to change the existing proforma. Further, it is proposed to have a separate proforma for obtaining any information relating to Transfer Pricing and prescription of a separate proforma for the same.

The Foreign Tax ; Tax Research Division has requested for views/comments on the following to the FT , TR Division by the 15th December, 2011:

++ for developing separate proforma (T.P) for Transfer Pricing cases

++ for any improvement required to be made to the present Proforma prescribed for obtaining information from countries/jurisdictions with which India has DTAA/TIEA.

++ Any other suggestion relating to the above

The FT , TR Division wants that at present the request may be sent to FT,TR. Division by the concerned Commissioner of Income Tax/Director of Income Tax as per the following guidelines:

++ Request should be made in the checklist/proforma as per Annexure A and Annexure B.

++ Request for the exchange of information may be addressed by the concerned commissioner of Income Tax/Director Income to JS, (FT,TR-I), CBDT, New Delhi, for the North America including Caribbean Island, Europe and Japan and to JS(FT,TR-II), CBDT, New Delhi, for the rest of the world.

++ The request for exchange of information for the cases getting time barred on 31st December, 2011 should be received in the office of JS (FT,TR-I) or JS(FT,TR-II), as the case maybe, by 15th December; 2011.

++ Separate requests should be made for different taxpayers even if the case pertains to same country or same foreign entity. Further, separate requests should be made for different countries even if the cases pertain to the same assessee.

CBDT FT,TR Division F. No. 504/31/2010-FTD-I, dated: 21 November 2011

CANT LINK BENEFITS OF I-T DEDUCTIONS TO DIRECT EMPLOYMENT: HC

 

CANT LINK BENEFITS OF I-T DEDUCTIONS TO DIRECT EMPLOYMENT: HC

The Bombay High Court has ruled that the Income-Tax Department cannot deny the benefits of deduction to the assessee companies on the ground that they must directly employ ten or more workers in their establishments.The court dismissed the plea of the Revenue which said the benefits of deduction under the income-tax law cannot be extended to the assessee employing the stipulated number of the workers through the agency or contractors.The condition imposed under Section 80IB(2)( iv) of the Act (Income Tax Act,1961) is that the assessee must employ ten or more workers in the manufacturing process / production of articles or things and it is immaterial as to whether the workers were directly employed or employed by hiring workers from a contractor,said a bench comprising Justice JP Devadhar and Justice AR Joshi.The bench said: When Section 80IB(2)( iv) of the Act merely provides that the undertaking must employ ten or more workers in the manufacturing process carried on with the aid of power,it would not be proper to hold that Section 80IB(2)( iv) refers to ten workers employed by the assessee directly.When the language used in Section 80IB(2) (iv) of the Act does not suggest that restricted meaning must be given to the expression worker,it would not proper to give a restricted meaning to that expression,the court pointed out.The bench in its order said,the expression worker is neither defined under Section 2 of the act nor under section 80IB(2)( iv) of the Act. – www.economictimes.indiatimes.com

Publication of Names of Accused - A Responsible Act - Not a Casual Joke AS per

 

Publication of Names of Accused - A Responsible Act - Not a Casual Joke

AS per the Service Tax (Publication of Names) Rules, 2008 , the following procedure has to be followed for publication of names of offenders:-

3. Publication of names and other particulars.- Subject to the provisions of these rules, the Central Government may cause to be published in the Official Gazette, print media, electronic media or by any other means, the names and particulars of the following persons, namely:-

(a) Persons, who have been adjudged under the provisions of the Chapter, to have contravened any of the provisions of the Chapter or the rules made thereunder, with intent to evade payment of service tax;

(b) Persons who have been adjudged to pay but has not paid any amount, payable under the provisions of section 73A of the Chapter:

4. Initiation of action and publication.-(1) If the Commissioner of Central Excise, having jurisdiction over such person, is satisfied that it is necessary or expedient in the public interest to publish the names and any other particulars as he deems fit, he shall after due verification of the facts, and the circumstances of the case, forward a proposal in the Annexure appended to these rules for such publication to the jurisdictional Chief Commissioner.

(2) The jurisdictional Chief Commissioner, on receipt of proposal referred to in sub-rule (1), shall within fifteen days from the receipt of such proposal, examine it and if he is satisfied that circumstance of the case justify such publication, may make a recommendation to the Board accordingly.

(3) On receipt of the recommendation by the Board, or on its own, the Central Government may cause publication of the name and other particulars in a manner as specified in rule 3.

So, the power to publish the names is with the Central Government and not even with the Board.

Even the premier investigative agency – CBI does not publish names of corrupt officials caught red handed!