CA Sujay Ajgaonkar has pointed out that China’s fall from grace over the mishandling of the Covid-19 pandemic has presented an opportunity to India to project itself as a manufacturing alternative to China. He has also pointed out that India’s economic landscape and the recent tax reforms make it very attractive to foreign companies. He has explained the legal position with reference to section 115BAB of the Income-tax Act, 1961 (tax on income of new manufacturing domestic companies) and the discontinuance of Dividend Distribution Tax (“DDT”)

INTRODUCTION

1. The start of the new Financial Year 2020-21 has not been promising for a lot of countries, including India. The pandemic, Covid-19 has brought to test the firefighting abilities of Nations with the world’s economic well-being now at stake. Testing times pose an opportunity for many who are quick to act. With China’s swift fall from grace in the handling of this pandemic, many developing Asian countries now have an opportunity to present themselves as manufacturing alternatives to China. India’s economic landscape and the recent tax reforms make it an attractive destination for new manufacturing activities and foreign investments, especially for countries who were dependent on China for raw materials, components, several merchandise, etc.

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CA Nidhi Surana has conducted an exhaustive study of the provisions of section 271AAD of the Income-tax Act, 1961, which imposes penalty for false entries etc in the books of account. She has explained the precise scope of the section with reference to practical examples and case laws. She has opined that the provision is too wide in its scope and poses the danger of being abused by Assessing Officers

Various mis-endeavours have come to light, after the introduction of Goods and Service tax Act, where in several cases there was a fraudulent input tax credit (ITC) claim. In these cases, fake invoices are obtained by suppliers registered under GST to fraudulently claim ITC and reduce their GST liability. These invoices are found to be issued by racketeers who do not actually carry on any business or profession. They only issue invoices without actually supplying any goods or services. The GST shown to have been charged on such invoices is neither paid nor is intended to be paid. Such fraudulent arrangements deserve to be dealt with harsher provisions under the Act.

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CA Sanjay Mody has pointed out that the result of the amendment made by the Finance Act 2020 to section 17(2)(vii) of the Income-tax Act is that the contributions made by the employer in NPS account of the employee, after being included as ‘Salary’ in the hands of the employee, may also be included as ‘Perquisite’ in computing his or her taxable salary income, resulting in double taxation. He has urged the Government to rectify the ambiguity as it will otherwise lead to litigation and also frustrate the social objective of the NPS

Employer’s contribution in NPS (National Pension Scheme) account of the employee is includible in the taxable income of an employee-assessee as ‘salary’and even thereafter, by the Finance Act, 2020, an amendment has been made in the definition of ‘perquisite’ so as to include such contribution therein also in certain circumstances. Therefore, the said amendment is apparently capable of leading to double taxation in the hands of employee-assessee of very same amountof employer’s contribution to his NPS account first, as salary and then again as perquisite.

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Advocate Neelam Jadav has collated all the important judgements of the Bombay High Court delivered in the period from January 2019 to February 2020. She has arranged all the judgements section-wise to aid reference. Several of the judgements are not yet reported in the Journals. She has also highlighted the cases where the Supreme Court has granted or rejected Special Leave Petitions

Honourable Bombay High Court has delivered more than 500 judgments in a year on direct taxes many are unreported. For the benefit of Tax professionals we have tried to prepare the gist of 362 Judgements, section wise, which may be useful in their day to day practice.

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Advocate Dharan Gandhi has traced the legislative history relating to ‘Tax Collection At Source’ (TCS). He has argued that while the purpose of the legislation is laudable, the means to achieve such purpose are not correct or apt. He has also claimed that some amendments are a complete misfit and that there are other ways to deal with such issues. He has also warned that the TCS provisions are vulnerable and stand at the peril of being declared unconstitutional

In life, it is evidenced that an action is initiated with a particular purpose, but with the passage of time, the purpose changes or is lost. This is so often witnessed under the Income-tax Act, 1961 (‘Act’). A particular section is inserted with a particular object, but slowly the section gets amended and the purpose seems to fade away. One particular section which exemplifies this trend is section 206C of the Act dealing with ‘tax collected at source’ (‘TCS’).

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Advocate Rahul Sarda has argued that section 115BBE of the Income-tax Act, which was enacted to deal with the concept of taxing “deemed unexplained income“, is a striking example of the poor quality of drafting by the legislature which has led to a proliferation of unnecessary litigation. He has pointed out that the over-zealousness and non-application of mind by Assessing Officers has compounded the problem. He has also considered whether taxpayers caught up in the web of litigation should opt for the Vivad se Vishwas Scheme. He has also advised, with clarity, on the merits and demerits of opting for the scheme

Introduction of section 115BBE and amendments

1. Section 115BBE of the Income-tax Act, 1961 (the “Act”) contains special provisions for taxation of cash credits, unexplained money, investments etc. It was introducedw.e.f. Financial Year 2012-13 onwards. Prior to introduction of this section, such incomes were subject to tax as per the tax rate applicable to the assessee and in case of individuals, HUF, etc., no tax was levied up to the basic exemption limit.

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CA Rohan Sogani has explained in a comprehensive manner the tax implications of buy-back of shares. He has also opined on whether the provisions of sections 56(2)(x) and 50CA and GAAR apply. The relevant provisions of the Companies Act and the Stamp Act have also been referred. The author has also drawn attention to the important judgements which have a bearing on the issue

Buy-Back is one of the important provisions in the Companies Act, 2013, which enables a company to purchase its own shares. Amongst other host of reasons, a program of buy-back is resorted to by a company to distribute surplus cash to its shareholders or to even provide investors an opportunity to exit from their investment, especially in case of unlisted/private companies.

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CA Sunil Maloo has pointed out that the in the latest Budget session, the Government had tried to cut the wings of stateless Indian Citizen who used to devise means to avoid taxation in India. In the backdrop of this, the Government amended provisions of Section 6 of the Income-tax Act, 1961. However, the same appears to have backfired. The author has highlighted the other side of the coin of the recently introduced deemed residency provisions

Extracts from Memorandum –the legislative intention

The issue of stateless persons has been bothering the tax world for quite some time. It is entirely possible for an individual to arrange his affairs in such a fashion that he is not liable to tax in any country or jurisdiction during a year. This arrangement is typically employed by high net worth individuals (HNWI) to avoid paying taxes to any country/ jurisdiction on income they earn. Tax laws should not encourage a situation where a person is not liable to tax in any country. The current rules governing tax residence make it possible for HNWIs and other individuals, who may be Indian citizen to not to be liable for tax anywhere in the world. Such a circumstance is certainly not desirable; particularly in the light of current development in the global tax environment where avenues for double non-taxation are being systematically closed.

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Advocate Ajay R. Singh has culled out in a systematic manner the important principles of law emanating from the recent judgement of the Supreme Court in New Delhi Television Ltd vs. DCIT. He has also applied his mind to the applicability of the second proviso to section 147 with respect to an asset or financial interest in a foreign country. He has also considered whether the amendment to section 150(1) to lift the embargo of limitation under section 149 applies prospectively or has retrospective effect

In midst of the Covid-19 lockdown the Hon Supreme court rendered yet another landmark judgement under Income tax Act in New Delhi Television Ltd vs. DCIT. The Supreme court once again reiterate the important legal principles in context to reopening of assessment beyond the period  4 years. The decision also deals with basic principles related to issuance of notice, recording of reasons  and opportunity of hearing . Though the decision needs to be read in context of the facts of the case, however the decision will go a long way in understanding the legal -principles in relation to reopening of assessment.

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Snehal Kanzarkar, a law student, has explained the amendments brought by the Finance Act 2020 relating to equalization levy. She has also explained the need for the levy, its scope, exceptions and the reforms brought in by the Finance Act 2020. She has delved into the major challenges involved in the implementation of the levy and proposed suggestions for resolution of the issues. The author has argued that equalization levy is a much required reform for prevention of tax-evasion by foreign e-commerce entities. She has, however, suggested that the implementation of the same may be deterred till the challenges posed by COVID-19 are resolved because a majority of the required services are provided online

Introduction

Equalization levy has been defined as follows in section 164 (d) of the Finance Act, 2016 as follows:

“Equalisation levy means the tax leviable on consideration received or receivable for any specified service under the provisions of this Chapter (Chapter VII, Finance Act, 2016)”

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