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JUNE 2021 VOL. 53-A PART 3 PAGES 116 PRICE: R100 THE BOMBAY CHARTERED ACCOUNTANT JOURNAL CURIOSITY TO CREATIVITY CARO 2020 SERIES: ANTI-TAX AVOIDANCE PPE & INTANGIBLE MEASURES FOR CAPITAL ASSETS GAINS: ARTICLE 9 OF MLI BCAJ VOL. 53-A PART 3 | JUNE 2021 3 | PART 53-A VOL. BCAJ UNFAIRNESS AND THE AUDIT: BUILDING INDIAN TAX SYSTEM PUBLIC TRUST 59th year of continuous publication Enhance your BCAS Referencer 2021-22 knowledge Direct and Taxes reading Indirect experience Taxes with complimentary, Easy to use Accounting Flip Book and Available Now Auditing Company Law Allied 0 Laws FEMA and International Tax Pre-release Price Printed Post release Price without Postage ` 800 version without Postage ` 1000 will be released by https://bit.ly/308R4hq 1st July, 2021* https://bit.ly/3b9x848 Postage Charges ` 200 Extra Bombay Chartered Accountants' Society 7, Jolly Bhavan 2, Ground Floor, New Marine Lines, Mumbai - 400 020. Telephone: + 91 22 6137 7600. Website : www.bcasonline.org * Tentative E-mail : [email protected] | E-Journal : www.bcasonline.org E-learning : https://bcasonline.courseplay.co/ Continuous No. 736 Price Rs. 100 (For Members only) CONTENTS In this issue . THE BOMBAY CHARTERED ACCOUNTANT JOURNAL Namaskaar | 5 Editorial Regulatory Scepticism | 7 QUOTE OF THE MONTH From the President | 9 The roots of education are bitter, but the fruit is sweet ▄ TAXATION Direct Taxes ARISTOTLE ● ARTICLE: Unfairness and the Indian Tax System | 20 ● GLIMPSES OF SUPREME COURT RULINGS | 44 ● CONTROVERSIES: Deduction for Penalties and Fines under the Motor Vehicles Act, 1988 | 46 ● IN THE HIGH COURTS: PART A: REPORTED DECISIONS 20 Business expenditure – Disallowance u/s 40(a)(ia) – Payments liable to deduction of tax at source – Royalty: (i) Amendment to definition in 2012 with retrospective effect from 1976 – Assessee could not be expected to foresee future amendment at time of payment – Disallowance not called for; (ii) Disallowance attracted only for royalty as defined in Explanation 2 to section 9 – Channel placement fee of Rs. 7.18 crores to cable operators – Not royalty – Explanation 6 cannot be invoked to disallow payment | 33 21 Capital gains – Computation – Deeming provision in section 50C – Applicable only when there is actual transfer of land – Assessee acquiring right in land under agreement to purchase land – Sale of land to third party with consent of assessee – Section 50C not applicable | 33 22 Charitable purpose – Registration of trust – Loss of all records in respect of registration due to floods in 1978 – Exemption granted in assessments up to A.Y. 2012-13 – Absence of documents cannot be ground to presume registration never granted and to deny exemption – Other contemporaneous records to be scrutinised to ascertain issuance of registration VOL. 53-A I PART 3 I JUNE 2021 certificate | 34 23 Deemed business income u/s 41(1)(a) – Remission or cessation of liability – Scope of JOURNAL COMMITTEE section 41(1)(a) – Amount obtained mentioned in provision refers to actual amount obtained – Royalty payment claimed as expenditure in A.Y. 1990-91 – Tax deducted at source on EDITORIAL BOARD such payment and interest paid to treasury – Royalty amount written back in accounts Chairman & Editor I Raman Jokhakar in A.Y. 1995-96 – Tax deducted at source and interest not refunded – Such amounts not Conveners includible u/s 41(1)(a) | 35 Jagdish Punjabi I Vinayak Pai 24 Deemed income u/s 56(2)(viib) – Company – Receipt of consideration for issue of shares in excess of their fair market value – Determination of fair market value – General principles Publisher I Raman Jokhakar – Assessee valuing shares following prescribed method – No evidence that method was Members of Editorial Board erroneous – Addition based on estimate by A.O. – Not justified | 36 Anil Sathe, Anup Shah, Ashok Dhere, 25 Income – Income or capital – Receipt from sale of carbon credits – Capital receipt – Amount Gautam Nayak, Kishor Karia, Sanjeev Pandit, not assessable merely because of erroneous claim for deduction u/s 80-IA | 36 Sunil Gabhawalla 26 Limitation – Assessment u/s 144C – Section 144C does not exclude operation of section Ex-Officio 153 – Notice by DRP four years after direction by Tribunal – Barred by limitation | 37 Suhas Paranjpe I Abhay Mehta 27 Limitation – Order of TPO – Mode of computing limitation | 38 Members Abbas Jaorawala | Bhadresh Doshi | 28 Penalty – Mistake in notice not to affect validity – Scope of section 292B – Mistake in Chandrashekhar Vaze | Chetan Shah | Gaurav specifying assessment year for which penalty was levied – Mistake could not be corrected Shah | Jagdish Shah | Kinjal M. Shah | u/s 292 | 38 Mihir Sheth | Nitin Shingala | Parth Desai | ● IN THE HIGH COURTS: PART B: UNREPORTED DECISIONS Puloma Dalal | Rajaram Ajgaonkar | 4 Vivad se Vishwas Scheme – Objective of scheme – Beneficial nature – Search case – Riddhi Lalan | Ritu Punjabi | Rutvik Sanghvi | Circulars are to remove difficulties and to tone down the rigour of law and cannot be Shreyas Shah | Sonalee Godbole | adverse to the assessee | 39 Tarunkumar Singhal | Zubin Billimoria. 5 Revision u/s 264 – Offering income inadvertently – Not liable to be taxed – Revision provisions are meant for the benefit of the assessee and not to put him to inconvenience – Commissioner should have examined the existing material in the light of Circular No. Printed and published by Raman Jokhakar on behalf of Bombay 14 (XL - 35) of April, 1955 and Article 265 of the Constitution of India | 41 Chartered Accountants’ Society, 7, Jolly Bhavan No. 2, New Marine Lines, Mumbai-400020. Phone : 61377600 E-mail : [email protected] ● TRIBUNAL NEWS: PART A: DOMESTIC TAXATION 16 Income from Other Sources – Interest on enhanced compensation for acquisition of Printed at Spenta Multimedia Pvt Ltd, Plot 15, 16 & 21/1, Village Chikloli, Morivali, MIDC, Ambernath (West), Dist. Thane. agricultural land is a capital receipt not chargeable to tax u/s 56(2) (viii) r.w.s. 57(iv) | 27 BOMBAY CHARTERED ACCOUNTANT JOURNAL JUNE 2021 3 276 (2021) 53-A BCAJ 17 Limited Scrutiny – Revision – Order passed in a limited scrutiny ● INTERNATIONAL TAXATION: Equalisation Levy on E-commerce cannot be revised on an issue which was not to be taken up in limited Supply and Services, Part – 1 | 51 scrutiny – Action of A.O. in not examining an issue which was not to ● TRIBUNAL NEWS: PART B: INTERNATIONAL TAXATION be taken up in limited scrutiny cannot be termed as erroneous | 27 3 The assessee being wholly managed and controlled from UAE, qualified 18 Penalty – Search case – Specified previous year – Addition made for benefit under India-UAE DTTA – Limitation of benefit provision not by taking the average gross profit rate cannot be considered to be applicable as it has been conducting bona fide business since years, assessee’s undisclosed income for the purpose of imposition of penalty long before start of India business | 31 u/s 271AAA | 28 ▄ 19 Capital gain – Investment in residential house – The date relevant ACCOUNTANCY AND AUDIT for determining the purchase of property is the date on which full ● ARTICLE: CARO 2020 Series: New Clauses and Modifications: consideration is paid and possession is taken | 29 Property, Plant and Equipment & Intangible Assets | 11 20 Evidence of data transmission and export of software by an assessee ● ARTICLE: Audit: Building Public Trust | 23 outside India is not a requirement to claim deduction u/s 10AA ● Ind AS/IGAAP – Deferred Tax Liability on Goodwill due to Amendment RBI approval for bank account maintained outside India not a in Finance Act, 2021 | 60 requirement to be fulfilled to claim deduction u/s 10AA ● FROM PUBLISHED ACCOUNTS | 62 No requirement of maintaining separate books of accounts for ● FINANCIAL REPORTING DOSSIER | 64 various STPI / SEZ units if the primary books of accounts maintained by assessee are sufficient to compute profits of various STPI / SEZ ▄ CORPORATE AND OTHER LAWS units | 29 ● ALLIED LAWS | 83 21 In the absence of any incriminating and corroborative evidence, ● LAWS AND BUSINESS: Family Settlements: Opening up extrapolation of on-money received in one transaction cannot be done New Vistas | 87 to the entire sales ● SECURITIES LAWS: Fit and Proper Person | 91 Addition u/s 68 in respect of unsecured loans cannot be made merely ● CORPORATE LAW CORNER | 94 on the basis of statement of entry operators ● RIGHT TO INFORMATION (r2i) | 100 Only real income can be subject to tax – Addition cannot be made on the basis of notings in loose sheets which are not corroborated ▄ NEWS AND VIEWS by any credible evidence | 30 ● REGULATORY REFERENCER | 96 Indirect Taxes ● MISCELLANEA | 102 ● RECENT DEVELOPMENTS IN GST | 73 ● BOOK REVIEW | 106 ● RECENT DECISIONS PART A: Goods and Services Tax | 77 ● LIGHT ELEMENTS | 108 ● RECENT DECISIONS PART B: Service Tax | 79 ● LETTER TO THE EDITOR | 110 International Taxation ● SOCIETY NEWS | 111 ● ARTICLE: MLI Series: Anti-tax Avoidance Measures for Capital Gains: Article 9 of MLI | 15 Your feedback may be sent to [email protected] Disclaimer The views expressed in this journal are the personal views of the contributors and the BCA Society does not necessarily concur with the same. The opinions expressed herein should not be construed as legal or professional advice. Neither the BCA Society, the publisher, the editor nor contributors are responsible for any decisions taken by readers on the basis of these views. Total No. of Pages : 116 including Covers 4 BOMBAY CHARTERED ACCOUNTANT JOURNAL JUNE 2021 277 (2021) 53-A BCAJ NAMASKAAR C.N. VAZE Chartered Accountant PLEDGE In the Mahabharat and the Purans, there are many strange Confusion worst confounded! Shrikrishna continued, but interesting stories. They have some great messages ‘Using bad words and insulting the Gurus or elderly for us because there is very deep thought behind them. persons is just like killing them.’ In the Mahabharat war, the Kauravs and Pandavs were in Arjun did accordingly. Everybody thought that the matter their respective camps one evening.