RAKCHAMPS Chartered Accountants

Recent update from gujarat high court in landmark case of pcit vs jigar yashwant shah order dated 28 August 2023 in tax appeal 80 & 96 of 2023 on widely impacting issue of taxability from mere allotment of shares (here right shares ) u/s 56(2)(viic) of 1961 Act in hands of share subscriber held approving underlying itat order that Author of judgment hon'ble justice biren vaishnav
"18. In view of the above, the provisions of Sec.56(2) would not be applicable to the issue of new shares which is also submitted by the explanatory note to the Finance Bill, 2010, wherein, it is clarified that sec.56(2)(vii)(c) of the Act ought to be applied only in the case of transfer of shares. It is trite law that allotment of new shares cannot be regarded as transfer of shares. Therefore, in order to capital of a company, of a certain numer of shares to a
person and till such allotment, the shares do not exist as such”. Therefore, it is only on allotment that the shares come into existence. In every case, the words “allotment of shares” having used to indicate the creation of shares appropriation out of unappropriated share given to a particular person which is also referred to in the note of clause to the Finance Bill 2010. Therefore, the aim and intention behind amending the provision of Sec.56 is to
prevent the practice of transferring unutilized shares at a price which are allotted for the first time by way of right shares. The amendment is therefore never meant to aim the “fresh issue” or “fresh allotment” of shares by a company."

Section 56(2)(viic) not applies to fresh issuances or allotments of shares by a company Read Gujarat High Court's recent ruling in PCIT vs. Jigar Jashwantlal Shah case regarding taxability of allotted shares under Section 56(2)(viic) of Income Tax Act.

More on Notices U/S 133(6):

1. Last year, a notices were issued to salaried class taxpayers related to fake deduction claimed by them in their Income Tax return and claiming refund from income tax department. All these notices were issued U/s 133(6) of Income Tax Act.

2. The scope of Section 133(6) is broad and includes the power to requisition books of accounts, bills, vouchers, contracts, agreements, and other relevant documents. The provision also covers the power to inspect and make copies of such documents.

3. The power to requisition documents can only be exercised for any inquiry or proceeding under the Income Tax Act. This means that the tax authorities cannot use this power for any other purpose outside the ambit of the Income Tax Act.

4. Practically, the notice could be tackled in the following ways:
Read and analyze the notice properly
Find out the reasons of receiving notice
Accumulate the required documents/ supporting document and formulate a reply.

5. An addition cannot be made merely because of non-response to the Notice issued under section 133(6) of the Act. [Refer to the case of Sonicwall Technology System India Pvt. Ltd. v. ACIT ITA no.3860/Mum./2019 dated December 02, 2022 (Mum) (Trib) and M/s Kesha Appliances Pvt. Limited v. ITO ITA No. 2175/Del/ 2016 March 09, 2018 (Del)(Trib)]

Write-Off Of A Bad Debt Can’t Be Held To Be An Asset Under Section 153A(1) Of The Income Tax Act, 1961: Bombay High Court

Ashok Commercial Enterprises (WP-2595-2021 & ORS)

Facts:
1. The petitioner/assessee is a partnership firm engaged in the business of financing, i.e., giving loans to parties on interest against cheques and bills of exchange. Petitioner is also engaged, in the business of trading in shares, property and broking.

2. The common AO of the petitioner and Hubtown Limited prepared a satisfaction note. The satisfaction note stated that the ledger account of the petitioner in the books of Hubtown Limited which showed monies received, repayment made, and interest entries thereon had a bearing on the income of the petitioner. The ledger account revealed income in the form of an asset stated to be a deposit in the account had bearing on the income of the petitioner beyond six years.

3. The assessee contended that the satisfaction note refers only to the loan account between the petitioner and Hubtown Limited and the alleged escapement is only in respect of the part thereof which is written off during the year. Writing-off of a bad debt cannot fall within the ambit of income, represented in the form of an asset. In any event, this write-off has been allowed in the original assessment proceedings and hence it cannot be said to be income that has escaped assessment.

4. The AO contended that the proceeding under Section 153C was initiated as per provisions of Section 153C, as the incriminating material was found during the search of another assessee that belongs to the petitioner. The entire proceeding up to the stage of the passing order passed under Section 153C read with Section 144 of the Act was done in accordance with the law.

Hon Bombay HC held as below:
1. In order to make an assessment for an assessment year which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year, in which the search was conducted, the 4th proviso to Section 153(A)(1) sets out certain further conditions which are required to be fulfilled before a notice can be issued for the relevant assessment years.

2. Clause - (a) of the 4th proviso requires that the Assessing Officer must have in his possession books, documents or evidence which reveal that income represented in the form of an asset which has escaped assessment amounts to or is likely to amount to rupees fifty lakhs or more.

3. Explanation 2 to Section 153A(1) of the Act sets out an expanded definition of the word “asset” for the purposes of the 4th proviso.

4. So, write-off of the bad debt cannot be held to be an asset under section 153A(1) of the Income Tax Act, 1961.

CBDT notifies rules to calculate life insurance income where premium exceeds Rs.5 lakh

1. The Central Board of Direct Taxes (CBDT) issued a notification no. 61/2023, on 16 August notifying new guidelines under Section 10(10D) of the Income Tax Act, 1961, prescribing a mechanism for calculating income from life insurance policies where the aggregate annual premium exceeds Rs.5 lakh.

2. The CBDT has notified the Income Tax Amendment (Sixteenth Amendment), Rules, 2023, prescribing Rule 11UACA for calculating income concerning the sum received upon maturity of life insurance policies where the premiums exceed Rs.5 lakh and such policies are issued after 1 April 2023.

3. As per the rules, the tax exemption on the maturity benefits under Section 10(10D) of the Income Tax Act for the policies issued after 1 April 2023 would be applicable if the aggregate premium paid is up to Rs.5 lakh a year.

4. For premiums beyond Rs.5 lakhs, the maturity proceeds will be added to the individual’s income and taxed at the applicable rates. This change in the tax provision of life insurance policies, except Unit Linked Insurance Policy (ULIP), was announced in the Union Budget 2023-24.

5. According to the CBDT notification, Section 10(10D) of the Income Tax Act provides income tax exemption on the amount received under a life insurance policy, including the amount allocated through a bonus on such a policy subject to certain exclusions.

6. From the assessment year 2024-25, the amount received under a life insurance policy issued after 1 April 2023 (other than a ULIP) will not be exempt under Section 10(10D) of the Income Tax Act when the premium amount payable for any of the previous years during the term of the policy exceeds Rs.5,00,000.

7. The CBDT guidelines regarding the sum received upon maturity of life insurance policies are elaborate and provide examples on the computation of the eligible exemption. However, the taxation provision for the sum received on the death of an insured is not changed and is exempt from income tax.

*News for Maharashtra Conveyance Deed Cancelled:* 🙋🏻‍♂

*Flat Owners will Get Their Name Registered in the Property Card of Revenue/Municipal Register. Maharashtra State's Cabinet Approved it in Principle, at its Meeting Held Yesterday. New Law will be Passed to Surpass The Procedure of Conveyance Deed. The draft for the New law will be Ready in Few Weeks and Act will Get Approval in the Budget Session or Monsoon session of Maharashtra Legislative Assembly. Now Enjoy Ownership of Land Alongwith Flat* ✌

*Supreme Court Judgement on Transfer of Flat to Nominee.* ✍🏻

*Land Mark Judgement* 🙋🏻‍♂

*Nominee of Deceased Member is Absolutely Entitled for The Ownership by Transfer in Co-op Society.*

*Society Can't Challenge The Right of Nominee a Settled Law of The Land.*

*No Legal Heirship,No Court Order Or Succession Certificate is Required.*

*Please Circulate,* *Important for Society Members and Office Bearers.*

Reference:
http://supremecourtofindia.nic.in/FileServer/2016-04-19_1461073219.pdf
www.makeinindialawfirm.com
*After Nomination is Registered by society You Don't Need*
*1-To Prove Legal Heirship.*
*2-No Further Court Order Required.*
*3-No Succession Certification.*

Thus, Transfer to the Registered Nominee is Automated.

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TDS not required to be deducted on commission paid to overseas agents: Delhi HC
Case Title: PCIT Versus Maharani Enterprises
Case No.: ITA 22/2021

Facts:
1. The respondent/assessee had sought a deduction of expenditure, which was the commission paid to agents overseas, but had not deducted the tax at source.

2. According to the AO, the non-deduction of TDS under Section 195 of the Income Tax Act, disentitles the assessee to avail of any deduction on that account.

3. The assessee contended that the commission paid to overseas agents was not chargeable to tax under the Act. Therefore, it had no obligation to deduct TDS.

4. The department contended that the question of whether any income is chargeable to tax in the hands of a non-resident agent is required to be considered in its assessment, and notwithstanding the question regarding the chargeability of such income, the payer is required to deduct and deposit TDS on any payments made by it.

Hon. Delhi HC held as under:
1. There is no material on record to even remotely suggest that the non-resident, who had been paid the export commission, had any permanent establishment in India, carried on any business within the taxable territory in India, or had any business connection in India rendering them liable to pay tax.

2. Section 195 of the Act provides for the deduction of tax in respect of the income that is chargeable under the Income Tax Act. There is no obligation on the part of an assessee to deduct or deposit tax if the payments made by it to non-residents are not chargeable to tax under the Income Tax Act.

3. The appeal of the revenue is dismissed.

Income Tax deduction for scientific research:
1. Where any assessee carries out any research of scientific nature related to the business carried on by him, 100% expenses are deductible in the following manner (Sec 35(1)(I) and Sec 35(1)(iv):

a. Expenditure incurred BEFORE the commencement of business:
• Capital Expenditure:
❑ Capital expenditure (other than expenditure on acquisition of land) incurred during three years immediately preceding the date of commencement of business shall be allowed as an expense in the year in which the business commences.

❑ Such capital expenditure can be incurred on acquisition of P&M, construction of building, acquisition of vehicles, etc for the purpose of scientific research.

❑ Where any assessee has purchased any land & building, expenditure is allowed only for the building portion and not for the land portion.

• Revenue Expenditure:
❑ Following revenue expenditure incurred during three years immediately preceding the date of commencement of business shall be allowed as an expense in the year in which the business commences:

➢ Salary paid to employees engaged in scientific research (excluding perquisites)
➢ Purchase of materials used in scientific research

b. Expenditure incurred AFTER the commencement of business:
• Capital Expenditure:
❑ 100% of the capital expenditure incurred by an assessee on scientific research in ir relation to his business is allowed as an expense in the year in which the capital expenditure is incurred by the assessee.

❑ Capital expenditure incurred on acquisition of land is not allowable as deduction Where any assessee has purchased any land & building, expenditure is allowed only for the building portion and not for the land portion.

• Revenue Expenditure:
Entire revenue expenditure incurred by an assessee on scientific research in relation to his business is allowed as an expense in the year in which such expenditure is incurred.

No depreciation can be claimed u/s 32 in respect of those assets for which deduction has been claimed u/s 35.

2. Any expenditure incurred by a company, on scientific research (not being in nature of cost of land and building) on in-house scientific research and development facilities as approved by the prescribed authorities is allowed as 100% deduction as under:

a. Company, engaged in any business biotechnology or of manufacture or production of any article or thing, other than those specified in the list of Eleventh Schedule.

b. Company should enter into an agreement with the prescribed authority for co operation in such research and development and audit of accounts maintained for such facilities.

c. Expenditure on scientific research in relation to Drug and Pharmaceuticals shall include expenses incurred on clinical trials, obtaining approvals from authorities and for filing an application for patent.

d. Only companies having in-house R&D centre(s) recognised by DSIR are eligible to make application for approval under section 35 (2AB) of the Income Tax Act.

e. For approval, companies having DSIR recognised in-house R&D centres are required to submit application in Form 3CK.

*Notification No. 31/2023- Central Tax dated 31.07.2023*

*Notification No. 32/2023- Central Tax dated 31.07.2023*
exempts the registered person whose aggregate turnover in the financial year 2022-23 is up to two crore rupees, from filing annual return for the said financial year.

*Notification No. 33/2023- Central Tax dated 31.07.2023*
Account Aggregator

*Notification No. 34/2023- Central Tax dated 31.07.2023*

*Notification No. 01/2023 – Integrated Tax dated 31.07.2023*

egazette.gov.in

Revision proceedings cannot be initiated where Appeal order was already passed on the issue: ITAT

Dipankar Mohan Ghosh (ITA No.277/Del/2021 and ITA No.531/Del/2021)

Facts:
1. Assessee filed appeals against the orders passed by the Ld. PCIT for Assessment Year 2012-13. The appellant raised various grounds challenging the validity of the Ld. PCIT’s order passed on 23/03/2020 and on 30/03/2021.

2. The key issue was related to the grant of additional TDS credit of Rs. 5,15,63,077/-. The Ld. CIT(A) had already decided this matter in an earlier appeal dated 08/05/2019, and the issue was no longer open for revision proceedings under Section 263.

ITAT Delhi held as under:
1. Based on the provisions of Explanation-1(c) to Section 263(1) of the Income Tax Act, the ITAT concluded that the Ld. PCIT could not invoke revision proceedings for a matter already decided in an earlier appeal by the CIT(Appeals).

2. The revision orders passed by the Ld. PCIT under Section 263 of the Income Tax Act were against the provisions of the Act and quashed them as void ab initio.

3. Consequently, the appeal was allowed in favor of the appellant.