Books of Accounts can not be rejected for mere absence of a few vouchers
1. Vishal Infrastructure Ltd. vs Assistant Commissioner Of … on 29 March, 2006 2007 104 ITD 537 Hyd
2. Kerala High Court in the case of CM. Francis & Co. (P.) Ltd. v. CIT
3. Allahabad High Court in another case of Imran Ahmed v. CIT 1982 Tax LR (NOC) 111 (All.)
MES Contractor be assesses at 7.5% says Jodhpur Tribunal
Assessee was engaged in business of contract work of military engineering services – Assessing Officer having found that assessee disclosed lower gross profit rate 7.20 per cent in relevant year, in comparison to 10.25 per cent in immediately preceding year despite three fold increase in gross receipt and assessee had not maintained salary register, payment register etc., rejected books of account of assessee and estimated income of assessee by applying net profit rate of 12.5 per cent – Whether since explanations of assessee that gross receipts had substantially increased by three times for which assessee had to reduce margin, and that contract works were executed in military and air force areas where working hours were lesser in comparison to normal civil work and that cost of various expenses and material had also been increased, was not rebutted by revenue, gross profit rate applied by Assessing Officer could not be sustained – Held, yes – Whether on facts, it would be fair and reasonable if net profit rate of 7.50 per cent was applied subject to interest to third parties, depreciation, interest to partners and salary to partners – Held, yes-Shri Ram Traders [2013] 37 taxmann.com 427 (Jodhpur – Trib.)
Exemption from income-tax to disability pension, i.e., “disability element” and “service element” of a disabled officer of the Indian Armed Forces
- Reference have been received in the Board regarding exemption from income-tax to disability pension, i.e. “disability element” and “service element” of a disabled officer of the Indian Armed Forces.
- It appears that field formations in certain cases are not uniformly allowing disability, pension in spite of Board’s Instruction No.136 dated 14th January, 1970 [F. No. 34/3/68-IT(A-I)].
- The matter has been re-examined in the Board and it has been decided to reiterate that the entire disability pension, i.e.“disability element” and “service element” of a disabled officer of the Indian Armed Forces continues to be exempt from income-tax.
Instruction : No. 2, dated 2-7-2001.
Important Changes in ITR Forms wef AY 2016-17
Where total Income of assessee is more than 50 lacs, the Individual/ HUF assessee is required to disclose cost of Immovable Assets viz. Land and Building and Movable Assets viz. Cash in Hand, Jewellery Bullion etc., Vehicle, Yatches, Boats and Aircrafts and also Liability in relation to Immovable and Movable assets in case amounts not disclosed in Balance Sheet. Earlier assesses having total Income exceeding 25 lacs were required to disclose this information. In ITR-3 and ITR-4.
Provision for availing TCS credit by the buyer for cash purchase of jewellery and bullion exceeding Rs. 5 lacs and Rs. 2 lacs respectively.[Introduced since Finance Bill 2012]
Partnerships firms going for presumptive Income can now file 4S instead of ITR-5. They can also claim deduction of interest and salary to partner.
Provision made in ITRsfor availing additional deduction of Rs. 50,000/- in respect of New Pension Scheme u/s 80CCD(1B) introduced by Finance Act 2015.
Disclosure of exempt share income of partner from firm/AOP/BOI done away.
Impact of ICDS to be disclosed.
Trusts to disclose percentage of commercial recipts visa vis total receipts, because as per Finance Act 2015, if commercial receipts exceed 20% OF TOTAL RECEIPTS of trust advancing objects of general public utility, it shall not be charitable and shall lose exemption u/s 11 and 12.
The Finance Act, 2015 has amended the provisions of Section 139 to provide that universities or educational institutions, hospitals or other institutions which are wholly or substantially financed by the Government, shall be mandatorily required to file their returns of income. Now such universities, hospitals, educational institutions, etc., have to disclose their name and annual receipts in new ITR 7. Further, they are also required to disclose the amount eligible for exemption in ITR 7.
In new ITR forms there is a separate row for disclosure of following details if taxpayer is liable for audit under any Act [other than the Income Tax Act]: 1) Act and Section under which taxpayer is liable for audit 2) Date of furnishing of Audit Report.
Finance Act 2015 extended the benefit of section 80JJAA for 30% of additional wages to new and regular workmen for three asstt years to non corporate assessee also. Hence ITRs 4 and ITR-5 amended to extend benefit to non corporate assesses.
“Require” before you aspire the assessee to afford the facility for conducting survey says ITAT Amritsar
ITAT Amritsar Bench in an interesting decision of Smt. Kailash Devi ITA 347/ASR/ 2015 pronounced on 05-04-2016 on conduct of survey had an occasion to ponder over the obligations cast upon Income Tax Authorities under the law. Often assessee and income tax authorities are at logger-heads for assessee not acting as “required” but before authorities allege the assessee for not doing his part of obligation, a line has to be drawn from where assesse’s part of obligations commence, because it is easy to tell a person how best to carry his pack until the burden is on one’s own back.
Facts of the case:
A survey was conducted on the assessee and stock of cotton was found in excess by 155.39 quintals. The stock was valued at Rs. 6,85,270/- after allowing 10% relief for non weighment by scale.
Plea of the assess:
Since the stock has not been weighed on the standardized scale , no addition for excess stock can be made.
Argument of the department and CIT A
It is obligation cast by law on the assessee to afford necessary facility for checking of stock and hence assessee has failed to provide weighment facility for checking of the stock of cotton. Had the survey team stubbornly refused to take inventory of stock by standardized scale provided by asseessee , only then the stand of the assessee had been tenable.
Judgement of the Court
Relevant Extract of Section 133A
As per Section 133A (1) “ ……an income authority may enter any place……at which a business or profession is carried on, ……………………………, and require any proprietor, employee or any other person who may at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession……………….to afford him the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein
As per Section 133(6)” If a person under this section is required to afford facility to the income-tax authority to inspect books of account or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded either refuses or evades to do so, the income-tax authority shall have all the powers under sub-section (1) of section 131 for enforcing compliance with the requirement made
Weighment has to be done as per Standards of Weighment and Measurement Act
The ITAT in para 6 of its Judgement has mentioned that it is not in dispute that weighment has to be done in accordance with provisions of Standards of Weights and Measurement Act 1976 (Now Legal Metrology Act 2009). As per section 3 of the said Act, its provisions override the provisions of any other law.
What is Mandate of section 133A
The Hon’ble Court also noted that provisions of section 133A are marked times and again by words “require” , “is required”. Thus the mandate of section 133A is that it is the surveying authority who is to “require” the person attending the business to afford necessary facility to check or verify the stock. It is only on such requirement having been expressed by the surveying authority that the said authority shall essentially be afforded such facility for checking or verification of the stock found in the survey. Hence it was obligatory on surveying authority to “require” assessee to make available standardized scales for weighment . The assessee is not obliged to provide what he is not “required”
Section 133A is based on principles of Natural Justice
The Hon’ble bench of ITAT Amritsar also elaborated that use of word “require” in the section is clearly based on natural justice principle that nobody , muchless a person as referred to in the section can be presumed to know the law. Rather, in such a situation like one at hand, the person needs must be aware, by statutory authority i.e. Income tax authority, that the stock found in the survey is to be weighed as per provisions of Standards of Weights and Measurement Act 1976 for which necessary facility is to be provided by the person to the authority.
The Bench also held that it is also trite that Income tax authority must help the assessee. The authority can not withhold such legal requirement from the assessee prejudicially and then on the contrary hold the assesssee liable for not making good such legal requirement.
This it is amply clear that it is “first” for the surveying authority to “require” the person attending the premises to afford the necessary facility.
Conclusion: A closed mouthed frog can not catch any flies. Hence the income tax authorities must “first “ require assessee to provide standardized scales under the law before they aspire or expect the assesee to provide necessary facility to check or verify stock. The Judgement also casts duty on the knowledgeable one to enlighten the ignorant ones. In this case survey team abstained from requiring and educating the assessee about need to provide standard weighment scales inspite of express provisions of Standards of Weights and Measuresment Act, 1976. And the Judgment propounds that law can forgive a child who is afraid of dark but not the men afraid of light.
The assessee was entitled to depreciation under section 32 of the Act in respect of the immovable properties taken over by it from the State Government, even though their legal ownership had not been transferred to the assessee
Loss from assigning the amount recoverable from Indian entity is short term capital loss which can be set off against capital gain Income of the assessee non resident company
Amount recoverable from wholly owned Indian subsidiary was assigned to another company by non resident company assessee for loss. Held by ITAT Mumbai that even though an advance, a debt or a recoverable amount is a ‘current asset’ from an accountant’s perspective, as long as such an advance, debt or recoverable amount satisfies the requirements of Section 2(14), it will have to be treated as a ‘capital asset’ for the purposes of computation of capital gain. The concept of ‘current asset’ is alien to the law on taxation of capital gains, or, for that purpose, to the law on taxation of income. Further as per Section 9(1)(i) any income, “through the capital asset situated in India” is deemed to accrue or arise in India, the debt being recoverable from company in India is a capital assets in India. As a corollary to this taxability of income, the loss through the capital asset situated in India is also required to be taken into account. Also the transaction satisfies the definition of term “transfer” u/s 2(47) as it is sale of debt. The sale of trade debts, or even loans, is a part of day to day trade and commerce. Hence loss from assigning the amount recoverable from Indian entity is short term capital loss which can be set off against capital gain Income of the assessee non resident company
Siemens Nixdorf Informationssysteme GmbH [2016] 68 taxmann.com 113 (Mumbai – Trib.)MARCH 31, 2016
Hotel providing accomodation on daily basis is assessable under Business Income and not Income from House property merely because tds is deducted u/s 194-I
TDS of the assessee is deducted u/s 194-I for providing accommodation on daily basis. However assessee’s memorandum of association indicates that main object of the company is to carry on the business of hotels, resorts, boarding, lodges, guest houses, etc. However no property was let out and assessee received only rentals for occupation of the premises on a daily basis. Assessing Officer’s contention that income has to be assessed under ‘house property’ because TDS is deducted u/s 194-I is not correct because Even if machinery was leased, the consequent rent comes under the definition of rent u/s 194-I. But machinery lease cannot be considered under ‘income from house property’. That indicates that just because TDS was made under section 194-I, it cannot be treated as ‘house property income’ as the rent definition includes lease of equipment, lease of furniture, fittings which cannot be considered as ‘house property Moreover, even if assessee has let out property but when the memorandum of association permits the business of letting out of properties as such, the income cannot be brought to tax as ‘income from house property’ as held in the case of Chennai Properties & Investments Ltd. 373 ITR 673. It was held by Supreme Court that where in terms of Memorandum of Association, main object of the assessee-company was to acquire properties and earn income by letting out the same, the said income is to be brought to tax as ‘income’ from business and not as ‘income from house property’ ITAT Hyderabad in Heritage Hospitality Limited [2016] 68 taxmann.com 150 (Hyderabad – Trib.) JANUARY 22, 2016
Reduction in the Loans and Advances or Debtors on the asset side of it’s Balance Sheet to the extent of the provision for bad debt would be sufficient to constitute a write off: Held by SC in Vijaya Bank
Whether it is imperative for the assessee-Bank to close the individual account of each of it’s debtors in it’s books or a mere reduction in the Loans and Advances or Debtors on the asset side of it’s Balance Sheet to the extent of the provision for bad debt would be sufficient to constitute a write off
SC in the case of Vijya Bank vs. CIT 323 ITR 168 has held that
What is being insisted upon by the Assessing Officer is that mere reduction of the amount of loans and advances or the debtors at the year-end would not suffice and, in the interest of transparency, it would be desirable for the assessee-Bank to close each and every individual account of loans and advances or debtors as a pre-condition for claiming deduction under Section 36(1)(vii) of 1961 Act……..because the Assessing Officer apprehended that the assessee-Bank might be taking the benefit of deduction under Section 36(1)(vii) of 1961 Act, twice over.
In this context, it may be noted that there is no finding of the Assessing Officer that the assessee had unauthorisedly claimed the benefit of deduction under Section 36(1)(vii), twice over. The Order of the Assessing Officer is based on an apprehension that, if the assessee fails to close each and every individual account of it’s debtor, it may result in assessee claiming deduction twice over. In this case, we are concerned with the interpretation of Section 36(1)(vii) of 1961 Act. We cannot decide the matter on the basis of apprehensions/desirability. It is always open to the Assessing Officer to call for details of individual debtor’s account if the Assessing Officer has reasonable grounds to believe that assessee has claimed deduction, twice over. In fact, that exercise has been undertaken in subsequent years.
There is also a flipside to the argument of the Department. Assessee has instituted recovery suits in Courts against it’s debtors. If individual accounts are to be closed, then the Debtor/Defendant in each of those suits would rely upon the Bank statement and contend that no amount is due and payable in which event the suit would be dismissed.
Further Held by Supreme Court that if amount is recovered subsequently and it is more than difference between debt and amount so allowed , the balance can be taxed u/s 41(4).