Shri. Sunil Moti Lala, Advocate, has prepared a compilation of important judgements on transfer pricing, international tax and domestic tax reported in the period from November to December 2015. The author has meticulously and systematically classified the judgements into various categories to enable ease of reference. He has also given the appeal numbers in several cases so as to enable the judgements to be retrieved from the website of the respective Court or Tribunal. A pdf copy of the digest is available for download. The digest will prove invaluable to all practitioners of taxation law

I. Transfer Pricing

a. International transactions

1. The Tribunal held that interest on delayed realization of sales proceeds from AE is not a separate international transaction but an integral part of sale made to the AE. It held that early or late realization of sale proceeds was only incidental to the transaction of sale and accordingly deleted the notional interest addition made by the TPO.
Avnet India Pvt Ltd v DCIT [IT(TP)A No.757(Bang.)/2011] – TS-629-ITAT-2015 (Bang) – TP

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CA Paras Dawar has meticulously analyzed the draft rules for grant of foreign tax credit issued by the CBDT and explained its nuances. He has also identified the provisions which have the potential to create hardship for taxpayers and suggested solutions to ameliorate the same

Computation of Foreign Tax Credit (‘FTC’) in case of assessee’s with cross border tax payments has been a major hassle for tax professionals. Absence of well-defined set of rules, coupled with few judicial precedents had resulted in diversified practices. The proposed draft rules regarding grant of relief under section 90/90A/91 of the Income Tax Act, 1961 (‘Act’) will help provide much needed clarity in an area which was until now marked by diverse interpretations. This will help reduce the hassle in claiming credit on tax paid in other countries and help achieve the Government’s vision for non-adversarial tax regime.

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CA Padamchand Khincha, CA. P Shivanand Nayak, CA. Prem Raj Rathod and CA. Mohit A Parmar have conducted an expert analysis of the provisions in the Finance Bill 2016 relating to the imposition of Equalisation Levy, Place of Effective Management (POEM) and Base Erosion and Profit Shifting (BEPS) and explained all of its implications in a simple and easy-to-understand format

Finance Bill 2016 has recommended various amendments to the Income-tax statute. These amendments are spread over various facets of the Act right from definitions to penal provisions. Among these amendments, the Finance Ministry recommends some of the far reaching amendments in international tax space. We have deliberated on few of them crafted into three portions below:

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CA H. N. Motiwalla has analyzed the provisions of section 44ADA proposed to be inserted by the Finance Act 2016 so as to subject professionals to presumptive taxation and explained its advantages and disadvantages

Ease of doing business

The provisions of Finance Bill, 2016 relating to direct taxes seeks to amend the Income-tax Act, 1961 inter alia in order to provide for widening of tax base and anti-abuse measures, and ease of doing business and dispute resolution. The amendments in presumptive taxation scheme have been proposed under this head by the Finance Bill, 2016.

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The Finance Bill 2016 proposes to make radical changes to the law relating to levy of penalty for concealment of income and furnishing of inaccurate particulars. Sections 270A and 270AA, which are intended to substitute section 271(1)(c), propose a levy of penalty for “under reporting of income” and “misreporting of income“. Shri. K. C. Singhal, former Vice President of the ITAT, has carefully analyzed the implications of the proposed amendments and explained the same with utmost clarity and with reference to practical examples

The levy of penalty for concealment or furnishing of inaccurate particulars of income under the existing provisions of Section 271(1)(c) of Income-tax Act 1961 has always been a matter of litigation between the revenue authorities and the taxpayers. The discretion regarding quantum of penalty led to corruption. The scope of such provisions was always a subject matter of litigation since tax authorities always levied the penalty whenever there was an addition or disallowance made by the assessing officer, may be because of pressure of higher authorities, even in cases where there was no prima facie case against the taxpayer. With a view to reduce the litigation and remove the discretion of tax authority, the Finance Bill, 2016 has proposed the insertion of new provisions in the form of new Sections 270A and 270AA in the Act which will replace the existing provisions of section 271(1)(c). The salient features of the new provisions are discussed below.

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S. R. Wadhwa, Advocate, has explained important nuances of the Income Declaration Scheme 2016 proposed to be introduced by the Finance Bill 2016. He explains that though the Scheme is declared to not be an “amnesty“, it falls squarely within the definition of an “amnesty” which means granting an official pardon to people who are guilty of an offense. He warns that the preferential treatment to tax evaders will shake the confidence of honest taxpayers in the credibility of the Government to deal with law breakers and invite contempt for its enforcement machinery, namely, the Income-tax Department

Income Declaration Scheme 2016 – Constitutional Issues

Introduction

The Finance Minister has provided one more opportunity to permit the non-filers, stop filers and persons with unaccounted income/investments to pay a moderate tax to declare their untaxed incomes by announcing the Income Declaration Scheme 2016 (the Scheme) through the Finance Bill – 2016 vide Chapter-X (Sections 197 to 208 of the said Bill).

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CA Gautam Baid has meticulously examined the proposed amendment to section 10(12) of the Income-tax Act, 1961 by the Finance Bill 2016 to tax the accumulated balance received by an employee from an Employee Provident Fund and explained its implications

Before the proposed amendment there is no ambiguity about the taxability of the amount received by the assessee from the recognised provident fund. Proposed amendment leads not only agitation from the stakeholders but also leads to ambiguity about the interpretation of provision and amount which may be taxed in the hands of employee out of total amount received by employee from REPF. This article explained that there is no reason to worry about the proposed amendment as there is no major impact on the taxing income due to such change.

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CA Prarthana Jalan has pictorially described assessment proceedings as a “seeds of litigation plant“. She has offered detailed and valuable step-by-step guidance on how assessment proceedings should be handled and what documentation should be kept and checked by the taxpayer so that the taxpayer can ensure that he is not saddled with a high-pitched or arbitrary assessment order

Assessment Proceedings can be termed as seeds of litigation plant because it is the very seeds that germinate and forms the plant i.e Assessment Order that the assessee and department litigate about. We usually take little care of these seeds and which results in thorny plant for the assessee (high pitched assessment order) containing the thorns of appeals, huge demand, penalty, rectifications etc. As said “as you sow, so shall you reap “so if we take little extra care of these seeds then they can turn out to be a blossom plant, which will provide shelter in the coming assessment proceedings also.

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CA Dr Arpit Haldia has explained that legal documents like written submissions, applications and petitions have to be precisely drafted so that the persons reading them are able to extract the information contained therein and arrive at a decision. He has given several valuable tips on how such documents should be drafted so that the points contained therein are stated clearly and unambiguously

This article is a humble effort on the given topic as a learner. It is an effort on a subject, which as a part of legal profession; I know is the one of the most important but yet an underrated area known as Legal Writing. Public perceives legal professionals to be good draftsmen. However, it’s a fact that time devoted towards developing art of legal drafting by legal professionals is much lesser than the time devoted towards analyzing and interpreting laws. In our education system also, much lesser time is devoted towards teaching of drafting skills to students in legal field.

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Advocate Rahul R. Sarda has meticulously explained the entire procedure for filing appeals before the CIT(A) and drafting applications for stay of demand. The author has also prepared a check-list of issues that require to be borne in mind to ensure that nothing important is omitted. He has also made extensive reference to all the important judgements which have a bearing on the subject matter. The Guide will prove invaluable to all taxpayers and tax professionals

(1) By 31st March, 2016, in addition to the numerous reopened assessments, Assessing Officers (AOs) shall finalise scrutiny assessments under section 143(3)/ 144 of the Income-tax Act, 1961 (the “Act”) for Assessment Year (AY) 2013-14, and for AY 2012-13 in cases where references had been made to Transfer Pricing Officers. Though scrutiny assessments constitute less than one percent of total cases [source: Office Memorandum F. No. 279/Misc./52/2014-(ITJ) dated 7th November, 2014], just like every year, this will result in demands worth thousands of crores of rupees being raised against assessees, followed by a spate of appeals with the Commissioners of Income-tax (Appeals) [the “CIT (A)”]. This write-up is an attempt to educate assessees on how to deal with assessment orders resulting in demands and on how steps must be taken by assessees to move the appellate authority including filing of stay applications.

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