DIRECT TAX: PROFESSIONAL UPDATES FOR THE 2nd WEEK OF AUGUST 2014, BY RAJPUT JAIN & ASSOCIATES TEAM

• As reported by some of the newspapers and PTI government may provide a major relief to the tax-payers, by increasing the Income Tax slab limit for exemption from Rs.2 lakh to Rs.5 lakh.
• The official e-mail of Income Tax Department has been migrated to an upgraded version requiring better security. For this, a new password is being reset for the official e-mail at http://mail.incometaxindia. Gov.in. You are requested to send your password request from an existing email to webcr@incometaxindia.gov.in mentioning your official e-mail id @incometaxindia.gov.in, name, designation and city. New password will be sent within 24 hours. Help line numbers- 0120-2770483, 9711572258, 9891860580
• Due to delayed share allotment share application money from related party couldn’t be held as a loan transaction [Parle Biscuits (P.) Ltd. vs. Deputy Commissioner of Income Tax (I.T.A. No. 9010 (MUM.) of 2010) Date of Order: 11.04.2014, ITAT – Mumbai].
• SC: Dismisses Revenue's SLP; “Precaution” can't be equated to “concealment” u/s 271(1) (c), held HC (Durr India Pvt. Ltd.)
• Capital Gain on depreciable assets held for more than 3 years is to be taxed at rate applicable to LTCG Smita Conductors Ltd vs. DCIT (ITAT Mumbai)
• Family arrangement cannot be regarded as being without consideration ACIT vs. BilakhiaHoldings P. Ltd (ITAT Ahmedabad) 
• Vide Notification No. 32/2014 dated 23-06-2014; CBDT has made mandatory filing of Wealth Tax Return only by electronic means for certain persons including company and an assessee being individual or HUF who is liable to audit u/s 44AB. 
•  One can reset  the password using the “Forgot Password” link in the Income Tax website by following three options:

-     Answer Secret Question

-     Upload Digital Signature Certificate

-     Enter E-filed Acknowledgement Number and Bank Account Number

If you are unable to retrieve your password, send an email request from registered email-id, to validate@incometaxindia.gov.in with following details:

                                i.            PAN

                              ii.            Name of the assessee as appearing on the PAN card

                            iii.            Date of Birth/Date of incorporation

                            iv.            Name of father as appearing on the PAN card (in case of individual)

                              v.            Registered PAN Address

• HC: Rejects delay condonation holding Revenue's explanation as "after thought" to "cover lapses" Harinagar Sugar Mills Ltd. [TS-453-HC-2014(BOM) 
• HC : Absent employee's 'non-resident' status in specific AY, Indian employer not representative-assessee u/s 163 Comverse Networks Systems India Pvt. Ltd. [TS-462-HC-2014(DEL)] 
•  ITAT : Loan to single entity ineligible for 'substantial business part’ exception u/s 2(22)(e) KishoriLal Agarwal 
•  ITAT : Allows smart cards preparation expenditure by TPA as revenue absent enduring benefit MD India Healthcare Services (TPA) Pvt. Ltd. [TS-448-ITAT-2014(PUN)] 
•  Query: How to claim benefit of tax deducted in advance on income which is taxable in subsequent years?

Answer: Certain provisions of TDS (including TCS) require deduction of tax at source at the time of payment or at the time of credit, whichever occurs earlier. Advance payments are also subjected to TDS. Old ITR form did not have any mechanism to carry forward the excess TDS, thus, taxpayers were required to show the entire TDS as a deduction and claim refund of excess TDS. To overcome the issues, the Schedule TDS/TCS in the ITR forms introduced two new columns:

(a) Unclaimed TDS/TCS brought forward

  (i) Financial Year in which deducted/collected

 (ii) Amount brought forward

(b) TDS/TCS being claimed this year from amount brought forward or from TDS/TCS of current financial year.

Thus, the portion of TDS credit pertaining to income taxable in the subsequent year can be carried forward to subsequent year and can be claimed in the year in which income is offered to tax.

• Profit from sale of agricultural land would not be included for purpose of computing book profit under section 115JB. [2014] 
• HC: Allows Sec 10(23C) exemption; Educational institute's "annual receipt" threshold excludes land sale consideration Madrasa E-Bakhiyath- Us-Salihath Arabic College [TS-503-HC-2014(MAD) 
•  SC: Dismisses assessee's SLP; HC held habitual dealer's share trading as business Manoj Kumar Samdaria [TS-502-SC-2014] 
•  Income Tax Department started sending e-mail/SMS to assessees for requesting to update contact details. 
•  Central Board of Direct Taxes (CBDT) extended the due date for obtaining and furnishing of the report of audit under section 44AB of the Act for Assessment Year 2014-15 in case of assessees who are not required to furnish report under section 92E of the Act from 30th day of September, 2014 to 30th November, 2014 vide F.No.133/24/2014-TP dated 20/08/2014. (Order Under Section 119 of the Income-tax Act, 1961) 
• Further, CBDT had also affirmed our representation regarding the tax audit reports filed prior to 25th July, 2014, which we had mailed on 12.08.2014 and further clarified that the tax audit report under section 44AB of the Act filed during the period from 1st April, 2014 to 24th July, 2014 in the pre-revised Forms shall be treated as valid tax audit report furnished under section 44AB of the Act.
  
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DIRECT TAX: PROFESSIONAL UPDATES FOR THE 1ST WEEK OF AUGUST 2014, BY RAJPUT JAIN & ASSOCIATES TEAM

• Data collection charges couldn’t be deemed as charges for professional services to attract TDS under sec. 194J [2014]
• E-filing of ITR-4 for A.Y. 2014-2015 is available now.
• Limitation period for filing appeal to be computed from the date of corrigendum order, instead of original order. [Fast Track Tour and Travels vs. Union of India (2014) 45 taxmann.com 263 Jharkhand High Court].
• The Government had constituted Tax Administration Reform Commission (“The TARC”) headed by Dr. ParthasarathiShome, in August 2013, to suggests core reforms to the tax administration set-up in the Country. The TARC has now submitted a report dated May 30, 2014 called the “First Report of the Tax Administration Reform Commission”. The said report makes several critical and far-reaching suggestions which are intended to radically change the working of the Income Tax and other Revenue Department.
• Disallowance under section 40A (2) (b) under Income Tax Act on account of Interest @ 18% – Held not excessive Issue [M/s. Shivam Cotton Corporation vs. Addl. CIT (ITAT Indore)].
• CBDT notifies new Wealth-tax return form mandatory e-filing except by Individual/HUF not liable to tax audit.
• CBDT has released ITR-5 which is applicable for Income Tax Return (ITR) of firms, AOPs, BOIs and LLPs for A.Y. 2014-2015. CBDT has released Java utility of ITR-5 and we expect Excel utility also to be released soon.
• Penalty u/s 271(1)(c) cannot be levied for mere surrender of outstanding balance of creditors in revised return  CIT Vs. Mathura Commercial Co. (Allahabad High Court)
• ITAT: No PE for supervisory services under India - Germany DTAA absent independent site operation GFA AnlagenbauGmbh
• HC: Confirms ITAT order; Interest income on NPAs not assessable on accrual basis KEC Holdings Limited [TS-380-HC-2014(BOM)]
• HC : Wide 'discretionary' powers conferred on Settlement Commission; Limited interference scope for Courts   Income Tax Settlement Commissioner [TS-379-HC-2014( AP)] 
• ITAT: Sec 10A/10B exemption provisions; CBDT Circular not benevolent, can't obliterate HC interpretation Biocon Limited.
• HC: “Less than full disclosure” during assessment prima facie valid for Sec 148 notice Rosy Blue (India) Ltd.
• Income tax - Whether when assessee fails to declare salary income on which TDS was deducted, same is to be treated as 'undisclosed income' - YES: HC Ahmedabad, June 27
• HC: No TDS on business service charges reimbursement to subsidiary on cost-sharing basis Emerson Process Management (India) Pvt. Ltd.
• ITAT: Permits “make available” import into India-France DTAA, distinguishes Cargo Community ruling on facts IATA BSP India
• Disallowance U/s. 40A(2)(b) on account of Interest @ 18% – Held not excessive M/s. Shivam Cotton Corporation Vs. Addl. CIT (ITAT Indore)
• HC: Quashes non-resident’s re-assessment on change of opinion on share transaction taxability  Ashwin Khimchand Jhakaria [TS-363-HC-2014(GUJ)]
• HC: Forex gain from repatriation of Euro-note proceeds a non taxable capital receipt  The Tata Power Co. Ltd [TS-364-HC-2014(BOM)] 
• HC: Denies Sec 80HHC deduction on interest income; No conflict in coordinate bench rulings  Ramu S. Deora [ TS-360-HC-2014(BOM)]
• ITAT: New 'lift’ at residence aides Javed Akhtar's profession; Installation expenses deductible  Javed Akhtar [TS-366-ITAT-2014(Mum)]
• 15-07-2014 is last day to file TDS/TCS returns for Q1 of 2014-2015.Use FVU 4.3. Fee of 200 per day with return from16-07-2014 (Govt. Returns by 31-07-2014).
• Reimbursement of demurrage charges to be excluded from shipping profits while applying sec. 44B [2014]
• Central Board of Direct Taxes has revised the monetary limit for filing an Appeal. CBDT Instruction 5 dated 10.07.2014, Income Tax Appellate Tribunal Rs. 4 Lac, High Court Rs. 10 Lac, Supreme Court Rs. 25 Lac.
• CBDT revises monetary limits for Dept appeal filing before ITAT/HCs/SC, to Rs. 4 lakhs, Rs. 10 lakhs and Rs. 25 lakhs respectively, as a measure to reduce litigation; Threshold applicable to appeals filed on or after July 10, 2014
• S. 54/54F: Two flats, even though acquired under different agreements & from different sellers, are one residential unit if there is a common kitchen CIT vs. DevdasNaik (Bombay High Court)
• S. 201 TDS: Even if the statute does not lay down a time limit, proceedings must be completed within a limited period DIT (IT) vs. Mahindra & Mahindra Limited (Bombay High Court)
• No addition U/s. 68 for RNBC/ Banks despite not proving creditworthiness of depositors if complied with KYC norms.
• No Capital Gains exemption u/s 54 and 54F for multiple Residential House Properties. Cannot invest in specified bonds more than Rs. 50 lacs in 2 Financial Years.
• Income Tax exemption raised to Rs. 3 lacs for Senior Citizens and Rs. 2.5 lacs for others. 80C limit raised to Rs. 1.50 lacs. Interest benefit of Self Occupied Property raised to Rs. 2 lacs.
• Period of holding for Long Term Capital Gain for Unlisted Security and Unit of Mutual Fund (other than Equity Oriented) increased from 12 to 36 months.
• Conversion To LLP – Capital gains to be computed on book value of assets transferred and not on market value [ITAT, KOLKATA. Aravali Polymers LLP -vs. - JCIT].
• HC : Upholds Sec. 194C(2) TDS applicability to individual sub-contractors, denies 2006 amendment's undue advantage (Palam Gas Service)
• Acceptance or Repayment of loan or deposit by ECS through bank account allowed u/s 269SS and 269T if other conditions regarding quantum etc satisfied.
• Budget 2014 Grants Power of Survey to the Income Tax Department for verification of TDS defaults.
• Trust Eligible for relief under Income Tax Act in respect of income from pharmacy run by it within its hospital premises.
• Assessing officer cannot object submission of additional evidence if same is accepted by CIT(A) under Income Tax Act [ITO vs. Karan Mehra (ITAT Delhi)].
• ITAT : Investment trust, being a mere facilitator, not eligible for incubation expense deduction (IFMR Trust [TS-425-ITAT-2014(CHNY)]
• Allahabad HC extends stay in LG Electronics case beyond 365 days (LG Electronics India Pvt. Ltd. [TS-427-HC-2014(ALL)]
• Under Section 50C of the Income Tax Act, if Assessee objects stamp duty valuation, AO must `
• For  funds setup by Government u/s 80G(2) like National Defence Fund, PM Drought Relief Fund, Chief Minister Relief Fund etc. use PAN as GGGGG0000G in ITR.
• HC : AP HC differs from Karnataka on 'lease vs. ownership'; holds building rent as business S. Premalatha [TS-440- HC-2014(AP)]
• CBDT has issued an order dated 24.07.2014 u/s 119 of the Income-tax Act, 1961 with regard to the filing of income-tax returns by the due date of31.07.2014 and the making of special arrangements by accepting the returns during normal office hours on 26th July & 27th July 2014 being Saturday & Sunday.
• Income Tax Department opens on 26 and 27 July, 2014 (Saturday and Sunday) for acceptance of returns during normal office hours [Order dated 24-07-2014].
• Long term Capital gains on Mutual Fund Units transferred after 10-07-2014 (date of Budget 2014) taxable at 20%. Taxable at 10% if transferred till 10-07-2014.
• Special Counters for Returns of Salaried Persons with Income up to 5 lacs at Pratayakshkar Bhawan, Civic Centre Delhi on 26, 28, 30 and 31 July.
• HC: Resuming Sec 158BFA penalty proceedings based on additions deleted by CIT (A), unlawful. Shri Ravi Teja Restaurents & Resorts Private Limited [TS-447-HC-2014(AP)]
• HC: Revenue from supply of equipment not Royalty; No transfer of rights included Haldor Topsoe [TS-450-HC-2014(BOM)]
• Check PAN of KARTA in Profile of HUF in Assessee login on IT e-filing website. Update, if not already updated. Otherwise problem in e-filing ITR of HUF.
• Addition cannot be made only on the basis of a surrender simplictor under Income Tax Act.  The Humble Agra ITAT in the case of Ram Prakash.
• ITAT: 'Donation' of shares is 'gift', holds sale as LTCG applying Sec 49(1) The Ajay G. Piramal Foundation [TS-445-ITAT-2014(DEL)]
• HC: Advance received against sale of room-nights under holiday scheme not taxable Pancard Clubs Limited
• 3CD uploaded in old format not valid even for earlier AY. as new 3CD applicable w.e.f. 25-07-2014. New Electronic form of 3CD to be launched shortly by ITD.
• Govt Deductors - Thursday (31-07-2014) is last date to file TDS/TCS Returns for Q1 of 2014-15. Use FVU 4.3. Fee of 200 per day with return from 01-08-2014.
• HC: Following Gujarat HC, Karnataka HC holds Sec 40(a)(ia) amendment extending TDS time limit retrospective (Santosh Kumar Shetty & Ors).
• Rajya Sabha clears Finance (No. 2) Bill, 2014 as approved by Lok Sabha and adopts the motion that the Bill be returned.
• New Forms 3CD/3CA/3CB Notified. Details of TDS/TCS Returns, TCS non-compliances, Interest on TDS/TCS, Disallowances u/s 40(a) [Notification of 25-07-2014].
• While claiming exemptions for HRA, it is mandatory to report PAN of the landlord to the employer if annual rent paid by the employee exceeds Rs. 1, 00,000. In case the landlord does not have a PAN, a declaration to this effect from the landlord along with the name and address of the landlord should be filed by the employee.
• ITAT: Can't hold entire slump sale as sham if valuation report defective Saipem Triune Engineering Pvt. Ltd. [TS-457-ITAT-2014(DEL)]
• No Penalty if two views possible under Income Tax Act. Assessee (Salman Khan) in the present case who derives income from profession of acting and advertisement assignments [Source-Salman Khan vs. ACIT (ITAT Mumbai)].
• The Finance Act, 2013 has amended Explanation to section 139(9), which provides that the return of income shall be deemed as defective return if tax including interest thereon, if any, payable in accordance with the provisions of the Act has not been paid on or before the date of furnishing of the return.
• Madhya Pradesh High Court grants ad-interim stay against operation of notices levying fee for failure to file TDS statement under Section 234E of the Income-tax Act, 1961.
• HC: Allows Sec 54 exemptions though new property possession not received within 2 years. (Kuldeep Singh)
• Profit from sale of agricultural land would not be included for purpose of computing book profit under section 115JB. [2014] 47 taxmann 329 (Cochin - Trib)
• Penalty u/s 271(1)(c) of the Income Tax Act  cannot be levied merely because an amount is not allowed or taxed as income [Honourable Supreme Court in the case of CIT vs Reliance Petroproducts Pvt. Ltd].

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