ITR: ITR (Trib) HIGHLIGHTS Volume 10 Part 3 ISSUE DATED 18-07-2011

ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS ISSUE DATED 18-07-2011

Volume 10 Part 3

APPELLATE TRIBUNAL ORDERS

-> Revision : AO's order cannot be revised because CIT has different opinion : Aditi Developers v. Asst. CIT (Mumbai) p. 241

-> Assessee carrying on business of distribution of computer products, income from commission is business income : Dy. CIT v. FX Info Technologies P. Ltd. (Delhi) p. 250

-> Expenditure on designing charges of telecom equipment is revenue expenditure : Matrix Telecom P. Ltd. v. Asst. CIT (Ahmedabad) p. 258

-> Assessee establishing claim to deduction of provision made for interest was bona fide, penalty not leviable : Mawana Sugars Ltd. v. Dy. CIT (Delhi) p. 266

-> Assessee filing belated voluntary return after search and offering capital gains, penalty cannot be imposed : K. Ramakrishnan (HUF) v. Dy. CIT (Chennai) p. 269

-> Amount paid to agent and other boards for treating effluents on account of business exigency, revenue expenditure : Asst. CIT v. T.M. Abdul Rahman and Sons (Chennai) p. 272

-> Assessee followed accrual basis under Companies Act and cash basis under ITA, rejection of accounts and additions to income not justified : Asst. CIT v. Shriram Transport Finance Co. Ltd. (Chennai) p. 27

-> Commercial transaction between two separate legal entities though belonging to same group, capital loss allowable : Asst. CIT v. Shriram Transport Finance Co. Ltd. (Chennai) p. 27

-> Assessee submitted bona fide writing off of debt in conformity with RBI directions allowable u/s. 36(1)(vii) : Asst. CIT v. Shriram Transport Finance Co. Ltd. (Chennai) p. 277

-> Assessee disclosing facts truly and fully, reassessment after four years on change of opinion not valid : Asst. CIT v. Simpson and Co. Ltd. (Chennai) p. 283

-> Provision for warranty made on scientific basis allowable u/s. 37 : Asst. CIT v. Simpson and Co. Ltd. (Chennai) p. 283

-> Where no nexus between borrowed funds and investments made for non-business purpose, interest allowable u/s. 36(1)(iii) : ITO v. Anjani Synthetics Ltd. (Ahmedabad) p. 291

-> Where assessee not able to prove genuineness of loans, imposition of penalty valid : STS Chemicals Ltd. v. Asst. CIT (Mumbai) p. 303

-> Charitable trust : Where no evidence object of general public utility was religious, trust entitled to approval u/s. 80G(5)(vi) : Brij Vikas Trust v. CIT (Agra) p. 310

-> Where original loans taken by father and assessee not for purpose of construction or acquisition of house property, interest not deductible u/s. 24(1)(vi) : K. S. Kamalakannan v. Asst. CIT (Chennai) p. 32

-> Where claim to set off carried forward business loss of earlier years of firm in which assessee a partner not bona fide, penalty leviable u/s. 271(1)(c) : Asst. CIT v. Dinesh Goel (Delhi) p. 330

-> French company obtaining services of associate company, employees of associate working in India

-> French company cannot be treated as agent of such employees : Pride Foramer S.A.S. v Asst. CIT (Delhi) p. 340

NEWS-BRIEF
CBDT plans Directorates for tax exemption cases to restore confidence to financial markets

"CBDT plans to have Directorate (Exemptions) in all the States and to begin with we will be setting up 10-11 new Directorates", a Revenue official said. However, the official did not specify any timeframe for creation of the specialised offices (Directorates).

The Government also allows tax exemptions to various organisations engaged in activities like charity, religious activities and scientific research-related. Early this year, the Board had set up a Committee to suggest ways to further strengthen the administrative process in relation with exempt entities.

The exemptions are given under the Income-tax Act, 1961, to encourage and fulfil certain social objectives. The Exemption Wing of the Income-tax Department, headed by Director-General of Income-tax (Exemptions), currently has seven Directorates - Kolkata, Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad and Mumbai. When the new Directorates are operationalised, the number will increase to 18. The Committee is likely to submit its report early next month, the official said. [Source : www.businessstandard.com dated June 30, 2011]

Top income-tax officials meet to identify tax defaults to be set up soon

In a bid to tighten the noose around defaulters, the Income-tax Department will set up a centralised system to identify entities which deduct tax at source but do not deposit it with the Government.

"This Centralised Processing Centre (CPC) would be set up to process TDS (tax deducted at source) statements and to identify the defaults and PAN errors . . . ", the Central Board of Direct Taxes (CBDT) said.

Besides, the idea behind creating the CPC is to develop a mechanism to rectify the defaults and errors in the process of TDS collection through intelligent technological aids and by persuading the deductors.

As per the income-tax laws, entities, both corporate and non-corporate, are required to deduct tax at source while making payments to their employees and deposit the same with the Government within a stipulated time period. If a person or corporate entity fails to pay the deducted TDS to the Government within the prescribed time, he could face rigorous imprisonment of 3 months to 7 years.

The CPC would identify TDS defaults, like non-payment, short payment, short deduction, late payment and others. TDS accounts form about 38 per cent. of the total direct tax collection. The Department would engage a Managed Service Provider (MSP) for setting up and managing the CPC for TDS. "The selected MSP will create and operate the CPC to process TDS statements for ITD", a revenue official said. The MSP would design and develop the required IT software.

"Any future requirements like change in Income-tax Acts/Rules, including Direct Taxes Code, which is likely to come into force in 2012, or any modification in tax information network application will also need to be taken into account at the time of designing the software", the CBDT said. [Source: www.businessstandard.com dated June 30, 2011]

DTAT with Germany is far from specific bank account details

Holding that the Double Taxation Avoidance treaty with Germany has been drafted in a "sloppy" manner, the Supreme Court today cautioned the Government not to enter into an agreement which would undermine Constitution.

"The fact that such treaties are drafted by diplomats, and not lawyers, leading to sloppiness in drafting also implies that care has to be taken to not to render any word, phrase, or sentence redundant" a Bench of justices, B. Sudershan Reddy and S. S. Nijjar said.

"The Government cannot bind India in a manner that derogates from constitutional provisions, values and imperatives", the court said adding "we agree that the language (DTAT with Germany) could have been tighter and may be deemed to be sloppy".

The Bench said the treaty with Germany does not prevent the Centre from disclosing the names of the persons having bank accounts in Liechtenstein bank.

"We have perused the said agreement with Germany. We are convinced that the said agreement, by itself, does not proscribe the disclosure of the relevant documents and details of the same, including the names of various bank account holders in Liechtenstein", the court said. [Source : www.financialexpress.com dated July 5, 2011]