Year: 2014

Archive for 2014


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DATE: (Date of pronouncement)
DATE: January 16, 2014 (Date of publication)
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S. 68 cash credits: A bank, NBFC etc is not required to give conclusive proof of the identity, credit worthiness etc of the depositor. Practical view has to be taken of deficiencies in KYC norms, absence of PAN card etc

The nature of primary onus and discharge thereof in terms of s. 68 is a question of fact and is not a static proposition. The nature of business, regulatory norms, rules, regulation and various other factors under which deposits are collected is to be properly considered. The fact that legislature has not prescribed any fixed parameters in this behalf, s. 68 being a deeming fiction and AO being entrusted the duty of satisfying himself in objective terms underline these relevant aspects. The primary onus and discharge thereof is to be examined by the AO with objectivity. That is how the onus u/s 68 qua share capital applications, banking industry and other statutorily regulated enterprises has been differently treated in terms of primary onus. It is to be appreciated that majority of the deposits are recurring deposits coming from earlier years. Besides assessee has about 3 crores of depositors belonging small income group people who may not be very educated and a big net work of field agents spread over various rural and other areas, many of them may also not be very literate. It has not been disputed that possible deficiencies in KYC compliance has been noted by the Board and as suggested by RBI, lien has been put on such accounts and not to repay unless these KYC deficiencies are made good. Under these facts and circumstances expecting the substantial rural and agro based citizenry to possess PAN card and drawing adverse inference therefrom is not justified in these facts and circumstances. The assessee’s business is akin to banking business and the discharge of primary onus by the assessee has to be on the same lines that of banking industry. A catena of judgments has been already referred in this behalf. In consideration of overall facts and circumstances, history of earlier litigation and ITAT judgment in assessee’s own case, the assessee should be considered to have discharged its primary onus in terns of s. 68.

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DATE: (Date of pronouncement)
DATE: January 15, 2014 (Date of publication)
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S. 272B penalty on deductor for wrong/ non-stating of PAN in TDS return is not applicable if information is not furnished by deductee. Penalty is Rs. 10000 per deductor and not per wrong PAN

There are two reasons why the appeal cannot be entertained. Firstly, the AO in the penalty order u/s 272B has not specifically referred to any default or failure by the assessee mentioning PAN Number even when the said particulars and details were available. The stand taken by the assessee was that the PAN Numbers were not furnished by the truck owners and, therefore, they were not quoted by them or PAN Numbers as informed were quoted. In case, the PAN Numbers are not furnished by the deductees, the assessee cannot be penalized u/s 272B. S. 139A also imposes the obligation on the deductees to furnish PAN Number to the deductor. Secondly, the stand taken by the revenue is contrary to the stand taken by the CBDT. The AO had imposed penalty of Rs.10,000/- in each case where PAN Number was not provided by the deductee. However, the CBDT has in letter dated 5.8.2008 vide No.275/24/2007-IT(B) clarified that penalty of Rs.10,000 u/s 272B is linked to the person, i.e., the deductor who is responsible to deduct TDS, and not to the number of defaults regarding the PAN quoted in the TDS return. Therefore, regardless of the number of defaults in each return, maximum penalty of Rs.10,000/- can be imposed on the deductor. Penalty cannot be imposed by calculating the number of defective entries in each return and by multiplying them with Rs.10,000/-. This also appears to be a legislative intent, as in many cases, the TDS amount may be small or insignificant fraction of Rs.10,000. (Clarified that the Q whether penalty u/s 272B can be imposed if the deductor has not correctly recorded the details despite proper representation by the deductee is not decided)

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DATE: (Date of pronouncement)
DATE: January 14, 2014 (Date of publication)
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High Court irked at in-fighting between the Bench and Bar of the ITAT Lucknow Bench and advises restraint, dignity and decorum to be maintained

From the record, it appears that originally, the dispute was between Accountant and Judicial Members of the Tribunal and it was not functioning. So, adjournment was sought by the petitioner, but the same was refused. However, on 06.03.2013, the case of the petitioner was decided in favour of the assessee in his presence. During the course of arguments, the petitioner has tendered his unconditional apology orally as well as in writing. When the petitioner has tendered his unconditional apology, no further adjudication is required. Matter is resolved in the Court. Keeping in mind the ratio laid down in M.P. Special Police Establishment vs. State of M.P 2004 (8) SCC 805 (that a Writ Court can pass appropriate orders to do justice to the parties) the impugned order is modified and the reference made by the Tribunal to the Institute of Chartered Accountant of India is expunged. The cost of Rs.5,000 is also cancelled. Adverse remark against the petitioner, if any, is also expunged. We hope that in future such type of incident will not be repeated. It is in the interest of justice to maintain the dignity and decorum of the judicial system and the Tribunal is an essential part of it

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DATE: (Date of pronouncement)
DATE: January 13, 2014 (Date of publication)
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Article 7 of DTAA: Even in a composite contract, Dept cannot assess off-shore profits without showing how it is attributable to the permanent establishment

Being a resident of Korea, the assessee is governed by the Income-tax laws as prevalent in Korea. Therefore, it has a tax identity in Korea. In addition, the assessee has submitted to the jurisdiction of Indian taxing authorities by furnishing return of income and, thereby, acknowledged that it has also a tax identity in India. The question is, this identity is covered by which provision of the India-Korea DTAA. In terms of Article 7(1), the assessee will acquire its tax identity in India only when it carries on business in India through a permanent establishment situate in India. By submitting the return, the assessee has held out that it is carrying on business in India through a permanent establishment situated in India. In the circumstances, the contention of the assessee, whether the Project Office of the appellant opened at Mumbai can be, or cannot be said to be a permanent establishment within the meaning of the said DTAA is of no consequence. In terms of the DTAA, if an enterprise does not have a tax identity in India in the form of a permanent establishment, it has no obligation to either submit any tax return with, or pay any tax to India. The Indian Taxing Authority is not entitled to arbitrarily fix a part of the revenue to the permanent establishment of the assessee in India. The assessee held out that a part of the revenue was received by it for doing certain work in India. It did not contend that even those works were done by or through its Project Office at Mumbai. On the other hand, there is not even a finding that 25 per cent of the gross revenue of the assessee was attributable to the business carried out by the said Project Office. Neither the AO nor the Tribunal has made any effort to bring on record any evidence to justify the same. Tax liability cannot be fastened without establishing that the same is attributable to the tax identity or permanent establishment of the enterprise situate in India

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DATE: (Date of pronouncement)
DATE: January 13, 2014 (Date of publication)
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Employees’ PF/ ESI Contribution is not covered by s. 43B & is only allowable as a deduction u/s 36(1)(va) if paid by the “due date” prescribed therein

S. 43B which permits a deduction for payments made upto the due date for filing the ROI applies only to the employer’s contribution to the provident fund etc. It does not apply to the employees’ contribution. The employees’ contribution received by the employer-assessee is deemed to be income in the assessee’s hands u/s 2(24)(x) and if the assessee has not credited the said sum to the employees’ account in the relevant fund or funds on or before the due date mentioned in Explanation to s. 36(1)(va), the assessee shall not be entitled to deductions of such amount in computing the income referred to in s. 28 of the Act. The argument that two view are possible is not acceptable because only one view is possible on a correct interpretation of the provision (Alom Extrusions 319 ITR 306 (SC) distinguished, Aimil Ltd 321 ITR 508 (Del), Nipso Polyfabriks 350 ITR 327 (HP), Spectrum Consultants 34 taxmann.com 20 (Kar), Udaipur Dugdh Utpadak Sahakari Sandh 35 taxmann.com 616 (Raj) & Hemla Embroidery Mills (P&H) dissented

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DATE: (Date of pronouncement)
DATE: January 9, 2014 (Date of publication)
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S. 234E: High Court grants interim stay on levy of fee for failure to file TDS statement

S. 234E of the Income-tax Act, 1961 inserted by the Finance Act, 2012 provides for levy of a fee of Rs. 200/- for each day’s delay in filing the statement of Tax Deducted at Source (TDS) or Tax Collected at Source (TCS). The constitutional validity of s. 234E has been challenged in the Kerala High Court. Vide an interim order dated 18.12.2013, the High Court has admitted the Petition and granted a stay of proceedings for a period of two months