S.14A + Rule 8D Disallowance: Onus On AO To Show Direct Nexus Between Exempt Income And Expenditure

DCIT vs. Allied Investments Housing P. Ltd (ITAT Chennai)

S. 14A & Rule 8D: Onus is on AO to show how assessee’s claim is incorrect. AO has to show direct nexus between expenditure & exempt income. Disallowance cannot be made on presumptions


In AY 2009-10 the AO made a disallowance of Rs 58 lakhs u/s 14A read with Rule 8D. The assessee claimed that the disallowance was not permissible on the grounds that (i) the AO had not recorded any satisfaction as to the correctness of the assessee’s claim that it had not incurred expenditure of more than 2% of the dividend income earned, (ii) it had not made any fresh investment during the year and the dividend was received from an unlisted company out of an investment made in an earlier year & (iii) the AO had not pointed out any direct nexus between the interest expenditure incurred and the exempt income earned during the year. The CIT(A) accepted the claim & restricted the disallowance to Rs 50,000 On appeal by the department to the Tribunal HELD dismissing the appeal:

(i) A disallowance u/s 14A read with Rule 8D cannot be made without recording satisfaction as to how the assessee’s calculation of s. 14A disallowance is incorrect. It is a prerequisite that before invoking Rule 8D, the AO must record his satisfaction on how the assessee’s calculation is incorrect. The AO cannot apply Rule 8D without pointing out any inaccuracy in the method of apportionment or allocation of expenses. Further, the onus is on the AO to show that expenditure has been incurred by the assessee for earning tax-free income. Without discharging the onus, the AO is not entitled to make an ad hoc disallowance. A clear finding of incurring of expenditure is necessary. No disallowance can be made on the basis of presumptions, (ii) the mere fact that some interest expenses were incurred cannot be the reason for disallowance unless the nexus between the expense and the exempt income is established, (iii) the assessee did not make any fresh investment during the year which could generate exempt income in forthcoming years, (iii) the exempt income earned during the year comprised of dividend received from an investment made in an earlier year, (iv) the interest expenditure of the year is not directly related to the earning of exempt income & (v) the AO has not pointed out any direct nexus between the interest expenditure incurred and the exempt income earned during the year (Hero Cycles Ltd 323 ITR 518 P&H) & Godrej and Boyce 328 ITR 81 (Bom) followed)

Software license for one year doesn’t confer any enduring benefit; licensing fee held as revenue expenditure

In the instant case the assessee had incurred expenses towards software license and claimed the same as revenue expenditure. The AO disallowed the claim of the assessee. On appeal, the CIT (A) reversed the order of AO. Aggrieved revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) When the assessee had acquired the license to use the software and the license was valid only for one year, it might be useful to the assessee for various functions like sales, finance, logistics operations and use of ERP system and it might confer certain benefits to the assessee but it couldn’t be said that there was enduring benefit to the assessee;

2) Thus, respectfully following the decision of the Bombay High Court in the case of CIT v. Raychem RPG Ltd. (2012) 21 taxmann.com 507 and taking into consideration the facts of the case, it was to be held that the expense incurred by the assessee to acquire the software license was revenue expense – DY. CIT V. DANFOSS INDUSTRIES (P.) LTD. (2013) 37 taxmann.com 240 (Chennai - Trib.)

TDS Credit must be given even if TDS Certificate is not available/ entry is not shown in Form 26AS

Citicorp Finance (India) Ltd vs. ACIT (ITAT Mumbai)

The assessee claimed credit for TDS which was denied by the AO on the ground that the claim did not match the entries shown in Form No. 26AS and that there was a discrepancy. On appeal, the CIT(A) held that the assessee would be entitiled to credit to the extent shown in the computer system of the department. On further appeal by the assessee to the Tribunal HELD:

The AO is not justified in denying credit for TDS on the ground that the TDS is not reflected in the computer generated Form 26AS. In Yashpal Sahwney 293 ITR 539 the Bombay High Court has noted the difficulty faced by taxpayers in the matter of credit of TDS and held that even if the deductor had not issued a TDS certificate, still the claim of the assessee has to be considered on the basis of the evidence produced for deduction of tax at source. The Revenue is empowered to recover tax from the person responsible if he had not deducted tax at source or after deducting failed to deposit with Central Government. The Delhi High Court has in Court On Its Own Motion Vs. CIT 352 ITR 273 directed the department to ensure that credit is given to the assessee even where the deductor had failed to upload the correct details in Form 26AS on the basis of evidence produced before the department. Therefore, the department is required to give credit for TDS once valid TDS certificate had been produced or even where the deductor had not issued TDS certificates on the basis of evidence produced by assessee regarding deduction of tax at source and on the basis of indemnity bond.

Note: See also 3i Infotech Limited where it was held “merely because the Department’s system does not indicate the TDS refund, it cannot be held that the assessee should be compelled to deposit the amount once again. It is for the Department to check the error in its system or point out fallacy in the assessee’s claim. There can be no question of penalizing the assessee for no fault committed by it”.

Husband gets HRA exemption on rent paid to wife

In the instant case the AO disallowed assessee's claim for HRA exemption on the ground that assessee and his wife were living together and claim of payment of rent by assessee to his wife was made to reduce his tax liability. The CIT(A) confirmed the addition on the ground the tenant (i.e., assessee) and landlord (i.e., his wife) were staying together which indicated that the whole arrangement was a colourable device. Aggrieved assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) The section 10(13A) provides that exemption would be allowable to an assessee for any allowance granted to him by his employer to meet expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the him;

2) However, the exemption is not available in case the residential accommodation occupied by the assessee is owned by him or the assessee has not actually incurred expenditure on payment of rent;

3) Admittedly, the AO had given a finding of fact that the assessee and his wife were living together as a family. Therefore, it could be inferred that the house owned by wife of the assessee was occupied by the assessee also;

4) The assessee had submitted the rent receipt(s) and payments had been duly verified. Therefore, the assessee had fulfilled the twin requirements of the provision, i.e., occupation of the house and the payment of rent. Thus, he was entitled to exemption under section 10(13A) - BAJRANG PRASAD RAMDHARANI V. ACIT (2013) 37 taxmann.com 186 (Ahmedabad - Trib.)

TDS credit to be awarded in deductor deposited it irrespective of 26AS mismatch

CBDT’s Instruction No. 5/2013 [F.No.275/03/2013-IT(B)], dated 8.07.2013

1. The CBDT issues instructions with respect to processing of Income-tax returns and giving credit for TDS thereon in the case of TDS mismatch. A few of the instructions on this subject issued in previous years are Instruction No. 1/2010 (25-2-2010) for returns pertaining to A.Y, 2008-09; Instruction No. 05/2010 (21-7-2010), Instruction No. 07/2010 (16-8-2010) and Instruction No. 09/2010 (9-12-2010) for returns pertaining to AY. 2009-10; Instruction No. 02/2011 (9-2-2011) for returns pertaining to A.Y. 2010-11; and Instruction No. 1/2012 (2-2-2012) and Instruction No. 04/2012 (25-5-2012) for returns pertaining to A.Y. 2011-12. The instructions gave decisions and the manner in which the TDS claims were to be given credit while clearing the backlog of returns pending processing. In the cases that did not fall under the specific TDS amount limit or refund amount computed, the residuary clause in these instructions gave the manner of processing those returns and it stated that “TDS credit shall be given after due verification“. 2. The Hon’ble Delhi High Court vide its judgment in the case ‘Court On its Own Motion v. UOI and Ors. (W.P. (C) 2659/2012 & W.P. (C) 5443/2012 dated 14-3-2013) has issued seven mandamuses for necessary action by Income-tax Department, one of which is regarding the issue of non-credit of TDS to the taxpayer due to TDS mismatch despite the assessee furnishing before the Assessing Officer, TDS certificate issued by the deductor. 3. In view of the order of the Hon’ble Delhi High Court (reference: para 50 of the order); it has been decided by the Board that when an assessee approaches the Assessing Officer with requisite details and particulars in the form of TDS certificate as an evidence against any mismatched amount, the said Assessing Officer will verify whether or not the deductor has made payment of the TDS in the Government Account and if the payment has been made, credit of the same should be given to the assessee. However, the Assessing Officer is at liberty to ascertain and verify the true and correct position about the TDS with the relevant AO (TDS). The AO may also, if deemed necessary, issue a notice to the deductor to compel him to file correction statement as per the procedure laid down. 4. Thus, the manner laid down by the Hon’ble HC in the above mandamus may be one of the method of due verification as mentioned in the various instructions referred in para (1) above. 5. This may be brought to notice of all Officers working under your jurisdiction for compliance

Extension of Tax Audit Report / TAR Efiling Only. No Extension of Due date

F .N o, 22 5
rI7
/
Government of India
Minlstry of Finance
/ Z$a3llTA.ll
Department of Revenue
Central Board of Direct Taxes
North.BIoch ITA.II Division
New Delhi, the 26th September,zltg
grd-er under Section 11.9 of the Income-tax Act. 1961

CBDT in exercise  of power under sec I l9(2)(a) of the IT Act, 1961 read with Sec 139 and Rule

12,  has decided to relax the requirement of furnishing the Report of Audit electronically as

prescribed  under the proviso to sub-rule (2) of Rule 12 of the IT Rules for the Assessnent Year

2013-14 as under-

(a)  The assesses,  who are presently frrding it difficult to upload the prescribed  Reports of

(b)  The said Report of Audit should however be fumished electronically on or before

Audit (as referred to above) in the system eiectronically may also fumish the same

rnanually befbre the jurisdictional Assessing  Officer within the prescribed  due date.

3 1 . 1 0 . 2 0 1 3 ,

(Rohit Gargl

Deputy-Secretary  to Government  of India

Copy tor-

1.  PS to F.M./0SD to FM/PS to MOS(R)/0SD  to MOS(R)

2.  PS to Secretary

3.  Chairperson (DT), All Members, Central Board of Direct Taxes.

4.  AII DGsIT

5.  All

6.  Directors/Depury Secretaries/Under Secretaries of  Central Board of Direct

Taxes.

7.  DIT (RSP&PR)/Systems,  New Delhi, for appropriate publicity and putting it on

departrnental website.

B.  Data Base Cell, CBDT

9.  The C&AG of India (30 copies),

10.The JS & tegal Advisor, Min. of Law &

t1,The Director General of Income Tax, NADT, Nagpur,

12.The Institute of Chaftered Accountants of India, lP Estate, New Delhi-110003.

13.All Charnbers  of Commerce

14, CIT

[Revenue).

/CCSIT

foint Secretaries/CslT, CBDT

fustice, New Delhi.

[OSD), Official Spokesperson/Media Coordinator of CBDT,  p o

J-!-

(Rofiit GareJ

Deputy Secretary  to Government  of Indta

Treatment of tax expense on deemed income under section 56(2)(viia) of the Income-tax Act, 1961 arising on purchase of investments

Treatment of tax expense on deemed income under section 56(2)(viia) of the Income-tax Act, 1961 arising on purchase of investments.

A. Facts of the Case

1. A company (hereinafter referred to as ‘the company’) in which public is not
substantially interested is incorporated on May 5, 2010 under the Companies Act, 1956
with the object to generate, receive, purchase, develop, use, sell, supply, distribute,
transmit and accumulate electrical or any other form of power and energy in general by
conventional or non-conventional methods, from any source whether hydro, water, wind,
solar, thermal, gas, oil, diesel, nuclear or otherwise at power stations, plants,
establishments, works and other ancillary facilities of every kind and description and
transmit, distribute and supply such power through transmission lines, cables, wires and
other facilities on a commercial basis to cities, towns, streets, docks, factories, markets,
buildings and other places both public and private. The company is a wholly owned
subsidiary of a company, B Limited, which holds 15% of the equity shares of another
unlisted company, C Limited.

2. During the financial year 2010-11, it was decided by the Board of the company to
acquire, if possible, all the balance 85% equity shares of C Limited, which were held by
other not related shareholders. The company intends to hold this for long term purposes
being a strategic investment. Accordingly, the company has acquired additional equity
shares (representing balance 85%) from various unrelated parties in separate trenches for
an agreed consideration (excluding stamp duty and tax under section 56(2)(viia) of the
Income-tax Act, 1961). The acquisitions were at a price lower than the fair value of the
said shares calculated in accordance with manner prescribed under Rule 11 (UA) of the
Income Tax Rules, 1962.

3. Under the provisions of section 56(2)(viia) of the Income-tax Act, 1961, in the
instances, where shares of a company in which the public is not substantially interested
are acquired for a consideration which is less than the aggregate fair value of the shares
by an amount exceeding Rs. 50,000/-, the excess of the aggregate fair value over the
consideration is an income under the head ‘Income from Other Sources’.

4. The querist has stated that the company has paid tax on the the excess of the
aggregate fair value over the consideration paid in accordance with the requirements of
section 56(2)(viia). In addition to the above, the company has also incurred expenses on
account of stamp duty, franking and bank charges in connection with the said acquisition.
1 Opinion finalised by the Expert Advisory Committee on 12.08.2011.

5. According to the querist, the payment of income tax under section 56(2)(viia) has
arisen out of the transaction of acquisition of shares and the company would not have
incurred such an expense otherwise. The internal business case for acquisition of these
shares was justified to the Board by considering the basic cost of acquisition, the
transaction costs like stamp duties, the cost of transfer of shares and the tax payable under
section 56(2)(viia), i.e., deemed income arising from purchase of investments, which
would be directly associated with purchase of such shares.

6. The querist has further stated that the provision of tax under section 56(2)(viia) is
a recent addition to the Income-tax Act, 1961, and such a situation of taxes payable due
to acquisition is not covered directly in paragraph 9 of existing Accounting Standard
(AS) 13, ‘Accounting for Investments’, which deals with various costs that could be
considered as part of cost of acquisition of an investment. In view of this, the querist has
referred to relevant technical material from notified2 Indian Accounting Standards (Ind
ASs) for technical guidance on the subject matter.

7. The querist has stated that as per paragraph 11 of Indian Accounting Standard
(Ind AS) 32, ‘Financial Instruments: Presentation’, definition of financial assets includes
an equity instrument of another entity. Paragraph 38 of Indian Accounting Standard (Ind
AS) 27, ‘Consolidated and Separate Financial Statements’ provides, inter alia, as follows:
“38 For preparing separate financial statements the entity shall account
for investments in subsidiaries, jointly controlled entities and associates
either:
(a) at cost, or
(b) in accordance with Ind AS 39”
Paragraph 43 of Indian Accounting Standard (Ind AS) 39, ‘Financial Instruments:
Recognition and Measurement’, provides as follows:
“43 When a financial asset or financial liability is recognised initially, an
entity shall measure it at its fair value plus, in the case of a financial asset or
financial liability not at fair value through profit or loss, transaction costs
that are directly attributable to the acquisition or issue of the financial asset
or financial liability.”
As per paragraph 9 of Ind AS 39, “Transaction costs are incremental costs that are
directly attributable to the acquisition, issue or disposal of a financial asset or
financial liability (see Appendix A paragraph AG13). An incremental cost is one
2 The Committee wishes to point out that although Ind ASs have been placed on the website of Ministry of
Corporate Affairs, these Standards have not yet been notified by the Ministry.that would not have been incurred if the entity had not acquired, issued or disposed
of the financial instrument.”
Paragraph AG 13 of Appendix A, Application Guidance to Ind AS 39, states as follows:
“AG13 Transaction costs include fees and commissions paid to agents (including
employees acting as selling agents), advisers, brokers and dealers, levies by
regulatory agencies and securities exchanges, and transfer taxes and duties.
Transaction costs do not include debt premiums or discounts, financing costs or
internal administrative or holding costs.”

8. The querist has stated that in view of the above, especially paragraph 9 of Ind AS
39 and paragraph AG13 of Appendix A to Ind AS 39, the company is of the view that the
tax on this notional deemed income is a transaction cost, which otherwise would not have
been incurred by the company and should be treated as acquisition cost of the investment
and hence, has capitalised the said tax cost.
B. Query

9. The company has considered the basic consideration, stamp duty charges and tax
under section 56(2)(viia) as cost of investment in shares in its accounts. The querist
believes that the purchase has resulted in a cash outflow on account of tax under section
56(2)(viia) and that this cost is a direct result of the acquisition of these said shares as
also it was a part of the business case which justified the overall purchase at the all
inclusive price. Had the acquisition of these shares not been made, the company would
not have incurred such costs. On the basis of the above, the querist is seeking opinion of
the Expert Advisory Committee on the following issues:
(i) whether the payment of tax under section 56(2)(viia) would qualify to be treated
as part of the cost of investment in the balance sheet of the company in view of
the explanation provided in paragraphs 9 and 43 of Ind AS 39 read along with
paragraph AG13 of Appendix to Ind AS 39.
(ii) If answer to (i) is no, what is the correct accounting treatment of such tax
expenses on deemed income under section 56(2)(viia) of the Income-tax Act,
1961?
C. Points considered by the Committee

10. The Committee notes that the basic issue raised in the query relates to accounting
for tax paid under section 56(2)(viia) in the separate financial statements of the company.
The Committee has, therefore, considered only this issue and has not considered any
other issue that may arise from the Facts of the Case, such as, accounting for stamp duty,
franking and bank charges, cost of transfer of shares and other costs incurred, accountingin the consolidated financial statements and accounting in the books of holding company
or company C, applicability of Ind AS 39 or other Ind ASs in the instant case, etc.
Further, the opinion expressed hereinafter, is purely from accounting point of view and
not from interpreting any legal enactment, such as, Income-tax Act, 1961.

11. The Committee notes paragraph 56(2)(viia) of the Income-tax Act, 1961, which
provides, inter alia, as follows:
“Where a firm or a company not being a company in which the public are
substantially interested, receives, in any previous year, from any person or
persons, on or after the 1st day of June, 2010, any property, being shares of a
company not being a company in which the public are substantially interested, –
(i) without consideration, the aggregate fair market value of which
exceeds fifty thousand rupees, the whole of the aggregate fair
market value of such property;
(ii) for a consideration which is less than the aggregate fair market
value of the property by an amount exceeding fifty thousand
rupees, the aggregate fair market value of such property as exceeds
such consideration”

12. The Committee wishes to point out that although Ind ASs have been placed on the
website of the Ministry of Corporate Affairs, these Standards have not yet been notified
by the Ministry. Accordingly, till the Ind ASs are notified by the Ministry, the existing
notified Accounting Standards would be applicable. Therefore, in the instant case, the
Committee is of the view that the transaction of acquisition of investment in shares would
be governed by the existing notified AS 13.

13. With regard to accounting for the tax levied under section 56(2)(viia) of the
Income-tax Act, 1961, the Committee notes paragraph 9 of AS 13, which provides that
“the cost of an investment includes acquisition charges such as brokerage, fees and
duties”. Keeping in view the nature of the items of acquisition charges mentioned in AS
13, the Committee is of the view that the cost of acquisition should include only those
direct charges which are incurred ‘on’ acquisition of investment, i.e., the expenses,
without the incurrence of which, the transaction could not have taken place, such as,
share transfer fees, stamp duty, registration fees, etc. The Committee notes that tax paid
under section 56(2)(viia) is levied when consideration paid for acquisition of investment
is lower than its fair market value for an amount exceeding Rs. 50,000 and such lower
consideration paid is deemed as income of the assessee acquiring such investment. Thus,
this tax is not a tax ‘on’ acquisition of shares rather it is a tax on ‘deemed income’ under
Income-tax Act, 1961. Accordingly, the Committee is of the view that such tax expense
is not a cost incurred ‘on’ acquisition of investment rather it is incurred after the
transaction of the acquisition of investment. In other words, it is not a means of acquiring
such investments; rather it is a result of such acquisition. Accordingly, such tax cannot be
considered as acquisition-related cost and, therefore, cannot be capitalised as cost ofinvestment. The Committee is further of the view that such tax paid should be treated as
normal tax and charged off to profit and loss account in the year in which it is incurred.

14. Since the querist has sought to take support in this regard from Ind ASs, the
Committee has also examined this issue in the framework of Ind ASs independently
without relating it to AS 13 or any other existing notified Standard. Under the framework
of Ind ASs, the Committee notes that paragraph 38 of Ind AS 27 provides, inter alia, as
follows:
“38 For preparing separate financial statements the entity shall account
for investments in subsidiaries, jointly controlled entities and associates
either:
(a) at cost, or
(b) in accordance with Ind AS 39”

15. The Committee notes from the above that Ind AS 39 would be relevant only if the
entity exercises the option to account for investment in subsidiary under that Standard. It
may be noted that if that option is exercised, the Committee notes paragraph 43 of Indian
Accounting Standard (Ind AS) 39, ‘Financial Instruments: Recognition and
Measurement’, provides as follows:
“43 When a financial asset or financial liability is recognised initially, an
entity shall measure it at its fair value plus, in the case of a financial asset or
financial liability not at fair value through profit or loss, transaction costs
that are directly attributable to the acquisition or issue of the financial asset
or financial liability.”

16. Presuming that the investment is not a financial asset at fair value through profit
or loss, the Committee notes that paragraph 9 of Ind AS 39 provides, “Transaction costs
are incremental costs that are directly attributable to the acquisition, issue or
disposal of a financial asset or financial liability (see Appendix A paragraph AG13).
An incremental cost is one that would not have been incurred if the entity had not
acquired, issued or disposed of the financial instrument.”

17. The Committee further notes that paragraph AG 13 of Appendix A, Application
Guidance to Ind AS 39, states as follows:
“AG13 Transaction costs include fees and commissions paid to agents (including
employees acting as selling agents), advisers, brokers and dealers, levies by
regulatory agencies and securities exchanges, and transfer taxes and duties.
Transaction costs do not include debt premiums or discounts, financing costs or
internal administrative or holding costs.”

18. The Committee notes from the above provisions of Ind AS 39 that only those
transaction costs that are directly attributable to the acquisition of investment can be
capitalised with the investment. The Committee is of the view that although the tax levied
under section 56(2)(viia) may be considered as an incremental cost of acquisition of
investment, it cannot be considered as ‘a directly attributable cost’ due to the reasons
stated in paragraph 13 above. Accordingly, even on considering the relevant provisions
of Ind AS 39, such tax levied cannot be capitalised as cost of investment.
D. Opinion

19. On the basis of the above, the Committee is of the following opinion on the issues
raised by the querist in paragraph 9 above:
(a) The payment of tax under section 56(2)(viia) does not qualify for
capitalisation as a cost of investment in the balance sheet of the company
as mentioned in paragraphs 13 and 18 above.
(b) Tax paid under section 56(2)(viia) should be treated as normal tax and
charged off to profit and loss account of the year in which it is incurred as
discussed in paragraph 13 above.

Source : ICAI

Digital Signature / DSC FAQs for Income-tax Purpose

Questions along with Answers

1. What is a Digital Signature?
Answer: A digital signature authenticates electronic documents in a similar manner a handwritten signature authenticates printed documents. This signature cannot be forged and it asserts that a named person wrote or otherwise agreed to the document to which the signature is attached. The recipient of a digitally signed message can verify that the message originated from the person whose signature is attached to the document and that the message has not been altered either intentionally or accidentally since it was signed. Also, the signer of a document cannot later disown it by claiming that the signature was forged. In other words, digital signatures enable the "authentication" and "non-repudiation" of digital messages, assuring the recipient of a digital message of both the identity of the sender and the integrity of the message. A digital signature is issued by a Certification Authority (CA) and is signed with the CA's private key. A digital signature typically contains the: Owner's public key, the Owner's name, Expiration date of the public key, the Name of the issuer (the CA that issued the Digital ID), Serial number of the digital signature, and the digital signature of the issuer. Digital signatures deploy the Public Key Infrastructure (PKI) technology. If you file electronically using digital signature you do not have to submit a physical copy of the ITR-V (Acknowledgment). Even if you do not have a digital signature, you can still e-File the Income Tax Return. However, you must also physically submit the printed and duly signed ITR-V (Acknowledgment) of your e-Filed Income Tax Return.


2. How legal is a Digital signature?
Answer: India is one of the select band of nations that has the Digital Signature Legislation in place. This Act grants digital signatures that have been issued by a licensed Certifying Authority in India the same status as a physical signature. Digital Signature Certificate deploys the Public Key Infrastructure (PKI) technology.


3. If a taxpayer does not have a Digital Signature, does this mean he/she cannot file the return online?
Answer: For non-auditable cases, DSC is not mandatory. If the DSC is used to the Income Tax Return (ITR), the ITR will be treated as legally filed immediately after uploading. However in case, a taxpayer does not have a DSC, he/she can still file the return electronically, but, in this case, a signed copy of ITR-V has to be sent to CPC, Post Bag No.1, Electronic City post office, Bangalore - 560100 within 120 days. After receiving the signed copy of ITR-V at ITD CPC, return will be treated as legally filed and will be processed.


4. How and where can I get a Digital Signature Certificate (DSC)?
Answer: The Information Technology Act, 2000 provides for use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically. Certification Agencies are appointed by the office of the Controller of Certification Agencies (CCA) under the provisions of IT Act, 2000. There are a total of eight Certification Agencies authorized by the CCA to issue the Digital Signature Certificates. They are listed as below:
Name of Certifying Agency
Website
Address
(n)Code Solutions Ltd., (A division of Gujarat Narmada Valley Fertilisers Company Ltd.)
http://www.ncodesolutions.com/
(n)Code Solutions, (A division of GNFC Ltd.) 301, GNFC Infotower, S G Highway, Ahmedabad 380054. marketing@ncodesolutions.com +91 79 40007300
e-Mudhra CA
http://www.e-mudhra.com/
M/S 3i Infotech Consumer Services Ltd., 3rd Floor, Sai Arcade, Outer Ring Road,Devarabeesanahalli, Bangalore 560036, Karnataka, India , Phone:+91 80 67821616 , Fax: +91 80 67175306 , Email:info@e-mudhra.com
Institute for Development & Research in Banking Technology (IDRBT)
http://idrbtca.org.in/
IDRBT, Castle Hills, Road No.1, Masab Tank, Hyderabad, Andhra Pradesh 500 057 (India)
MTNL
http://www.mtnltrustline.com/
3rd Floor, Mahanagar Doorsanchar Sadan, 9, CGO Complex, Lodi Road, New Delhi 110003
National Informatics Centre
http://www.nic.in/
A Block CGO Complex, Lodhi Road,New Delhi 110 003
Safescrypt
http://www.safescrypt.com/
Safescrypt Ltd. II Floor, Tidel Park 4 Canal Bank Road Taramani, Chennai Tamilnadu 600113
Tata Consultancy Services Ltd.
http://www.tcs-ca.tcs.co.in/
Tata Consultancy Services Ltd. 11th Floor, Air India Building, Nariman Point, Mumbai 400 021
For further details, visit http://cca.gov.in/rw/pages/faqs.en.do#igetadigitalsignaturecertificate


5. I already have a Digital Signature Certificate? Do I need a separate Digital Signature Certificate for e-Filing?
Answer: A person who already has the specified class II or III DSC for any other application can use the same for filing the Income Tax Return and is not required to obtain a fresh PAN embedded DSC. Fresh PAN embedded DSC is required in cases where the existing DSC has expired OR revoked.


6. How much does a digital signature cost?
Answer: The Digital Signature certificates are typically issued with one year validity and two year validity. It includes the cost of medium (a USB token which is a one time cost), the cost of issuance of Digital Signature and the renewal cost after the period of validity. The issuance costs in respect of each Certification Agency vary and are market driven.


7. How can a DSC be attached with the return while uploading?
Answer: The website allows the assessee to use Digital Signature Certificate as an option. Therefore, it is not possible to embed the DSC feature in the software utility /form. However, the assessee can browse and attach the Digital Signature Certificate at the time of submission of the Income Tax Return. Taxpayer has to first register his/her DSC on the e-filing website - either during Registration OR post LOGIN → Profile Settings → Register Digital Signature Certificate. Once DSC is registered, taxpayer has to use the same DSC while uploading the Income Tax Return.


8. The Web site accepts DSC in the .pfx format. Other formats like .cer are not being accepted. Can USB token based DSC be used to file the return?
Answer: DSC in USB token is also accepted.


9. It is not clear what class of DSC should be used while filing the return ?
Answer: DSC should be of Class II or III only, issued by CCA approved certifying agencies in India.


10. Whose DSC to be used for e-Filing Income Tax Return for Company / Firm / HUF?
Answer: In case, the e-Filing is being signed digitally using a Digital Signature Certificate, then the Digital Signature Certificate should be that of the Principal Contact assigned during registration OR the Principal Contact updated in 'Profile settings' → 'Change Principal Contact details'.


11. I am unable to register DSC in the ITD e-filing website?
Answer: Kindly try again with the correct details. If problem persists, contact Customer care at 1800-180-1861. You can also go through the Trouble shooting section where the possible solution is listed.


12. When I upload my return with DSC, I get the error 'fake path and can't read the file'. Why is it so?
Answer: Please do the following settings: Internet explorer → Tools →Internal Option → Security → reset the setting to medium high, close and reopen the Internet Explorer. OR Create a folder called 'fakepath' in your C drive and store the XML in the folder. On BROWSE, select this file and upload.


13. While registering my DSC, an error appears on the screen as "The Digital Signature Certificate is already registered". What should I do?
Answer: A DSC can not be registered by multiple users. When this error appears, it maybe that the DSC you are trying to register belongs to someone else. Please make sure that the DSC you are registering belongs to you and has your PAN and e-mail ID encrypted. The only exception for this rule is that an authorized signatory (principal contact) for an organization should register his/her own DSC to e-File for the organization. The same DSC can be used for personal e-Filing too.


14. While registering my DSC, an error appears on the screen as "The PAN mentioned in the Digital Signature Certificate does not match. Please retry.". What should I do?
Answer: The PAN in the Digital Signature Certificate does not match with your registered PAN. You should contact the Certificate Provider and get the PAN in your Digital Signature Certificate checked.


15. While registering my DSC, an error appears on the screen as "Validity of the Digital Signature Certificate has expired. Please update a valid Digital Signature Certificate". What should I do?
Answer: The validity period of the Digital Signature Certificate has ended. Attain a new Digital Signature Certificate from the Certified Service Providers and then register.


16. While registering my DSC, an error appears on the screen as "Invalid Digital Signature Certificate. Please contact your Certificate Provider". What should I do?
Answer: This could be due to the below reasons: 1. Digital Signature Certificate is revoked. 2. Digital Signature Certificate is not Level 2 or above. Only Level 2 or above Digital Certificates can be registered on e-Filing website. In this case, you should contact the Certificate Provider and get your Digital Signature Certificate checked.

ITR-V Do's & Don'ts

ITR-V Do's & Don'ts

 Please use Ink Jet /Laser printer to print the ITR-V Form. Use of Dot Matrix printer should be avoided.

 The ITR-V Form should be printed only in black ink. Do not use any other ink option to print ITR-V.

 Ensure that print out is clear and not light print/faded copy.

 Please do not print any water marks on ITR-V. The only permissible watermark is that of "Income tax
Department" which is printed automatically on each ITR V.

 The document that is mailed to CPC should be signed in Original.

 Photocopy of signatures will not be accepted.

 The signatures or any handwritten text should not be written on Bar code.

 Bar code and numbers below barcode should be clearly visible.

 Only A4 size white paper should be used.

 Avoid typing anything on the reverse side of the paper.

 Perforated paper or any other size paper should be avoided.

 Do not use stapler on ITR-V Acknowledgement.

 In case, you are submitting Original and Revised Income Tax Returns, do not print them back to back.
Use two separate papers for printing ITR-Vs separately.

 Please do not submit any annexures, covering letter, pre stamped envelopes, along with ITR-V.

 The ITR-V form is required to be sent to Post Bag No.1, Electronic City Post Office, Bengaluru,
Karnataka-560100, by Ordinary or Speed Post (without Acknowledgment) ONLY

 ITR-Vs that do not conform to the above specifications may get rejected or acknowledgement of receipt
may get delayed.

Arrears received by lawyer who stopped his practice on being elevated as judge not taxable as business income

Arrears of professional fee received by assessee after he had discontinued his legal profession of lawyer on being elevated as a judge of High Court couldn’t be taxed as business income despite insertion of section 176(4) in the Act

In the instant case the assessee was a practising lawyer before his elevation as a judge of the Delhi High Court. He received certain amount of arrears of his professional fees for professional services rendered in the earlier years before his elevation as a Judge of the High Court. The AO held that such receipts were chargeable to tax under section 176(4). On appeal, the CIT (A) deleted the addition made by the AO. Aggrieved revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) As per provisions of section 176(4), in the case of cessation of a profession by a professional, the receipt of any sum after such cessation shall be deemed to be the income of the professional and would be taxed in the year of receipt as if, it had been received prior to the cessation of the profession;

2) Section 176(4) introduces a legal fiction, which should be limited only to the purpose for which it has been created. Section 176(4) merely treats the receipt as the income of the recipient. In the absence of any further fiction in the section, the character of such receipt cannot be determined and no further fiction can be introduced so as to determine the head of charge under which such receipt would fall;

3) Thus, the express language of section 176(4) does not render the receipt to be treated as profit and gains of business or profession (PGBP). Therefore, in spite of introduction of section 176(4) in the Act, the receipts in question couldn’t be treated as the assessee's income falling under the head "PGBP”, even though they were the fruits of the assessee's professional activities;

4) It was due to the absence of any legislative provision that these receipts couldn’t be treated as business income falling under the head "PGBP”. They couldn’t be included in the total income of the assessee, even though the amount was received by the assessee before the discontinuance of his profession due to his elevation as the High Court Judge. Thus, the order of CIT (A) was to be confirmed. – ITO v. Justice Rajiv Shakdher (2013) 36 taxmann.com 585 (Delhi - Trib.)

Consideration received by an advocated in form of land to undertake patta and layout of properties is taxable as capital gains and not as professional receipts

Facts of the case:

A. The assessee, an practising advocate, entered into an agreement as per which he had to undertake the job of obtaining patta and design the layout of the properties and for the services rendered the owners agreed to transfer 3 plots of land to him;

B. In pursuance of the agreement, possession of the property was handed over to the assessee and General Power of Attorney was executed in his favour;

C. Sale agreement was executed in respect of three plots of land for a consideration of Rs. 1.5 crores out of which the assessee received a consideration of Rs. 90 lakh as ‘confirming party’.

D. The AO held that such receipt was to be assessed as income from professional services. On appeal, the CIT(A) reversed the order of AO and held that the receipt could only be taxed as capital gains. The Tribunal upheld the order of AO.

The High Court held as under:

1) The agreement entered between the assessee and the owners made no reference at all to the professional status of the assessee for taking his services. There was no mention about his being an Advocate and that his services were being taken only in that capacity;

2) The possession given of the entire 5 plots of land to the assessee was with the specific object of getting patta and layout of the property. The sale agreement made it very clear that the transfer of 3 plots of land to the assessee was intended by way of consideration for securing patta and layout and, as such, the original owners had entrusted the entire land to the assessee;

3) The assessee had rightly placed his reliance on section 2(47)(v) of the Income-tax Act, 1961, read with section 53A of the Transfer of Property Act, 1882, that the receipt would attract capital gains at his hands. There was nothing on record to show that the services to be rendered were taken in the capacity as a lawyer. Therefore, the Consideration received by an advocated in form of land to undertake patta and designing of layout of properties is taxable as capital gains and not as professional receipts – CIT V. J. MAHALINGAM (2013) 37 taxmann.com 38 (Madras)

Sum paid to access commercial information for further transmission to principal isn’t a ‘royalty’

Where assessee made remittance for procurement of commercial information for onward transmission to its principal, remittance made was not for availing technical services and did not amount to royalty

In the instant case the assessee had entered into a master clinical services agreement with its principal 'BHAG' for clinical trials. Assessee had arrangement with CSPL to provide information on clinical trial test undertaken by CTU of University of Kelmia, Sri Lanka. It applied for issue of certificate for non-deduction of tax on remittances made to CSPL which had no PE in India. The AO held that remittance for clinical services was in nature of royalty and was liable to be taxed in India. On appeal, the CIT (A) reversed the order of AO.

The Tribunal held in favour of assessee as under:

1) The services in question were services for supply of information which assessee was not using for any technical know-how but it was working as a conduit for supply of this information further to its principal;

2) Thus, the assessee was making remittance for procurement of commercial information for onward transmission to its principal;

3) The remittance made by the assessee was not for availing of technical services and did not amount to royalty. It was not liable for withholding taxes. Thus, the order of CIT (A) was to be upheld – ITO, TDS V. KENDLE INDIA (P.) LTD (2013) 37 taxmann.com 140 (Delhi - Trib.)

S. 50B: Transfer of assets without monetary consideration is not a “slump sale”

ITO vs. Zinger Investments (P) Ltd (ITAT Hyderabad)

The assessee transferred its manufacturing division to Novapan Industries Ltd under a scheme of amalgamation pursuant to which Novapan transferred investments worth Rs. 25.24 crore to the assessee and allotted shares worth Rs. 6.81 crore to the assessee’s shareholders. There was no monetary consideration. The AO held that the transfer of the manufacturing division was a “slump sale” and that it attracted s. 50B. He computed capital gains on that basis. The CIT(A) reversed the AO and held that there was no slump sale. On appeal by the department to the Tribunal HELD dismissing the appeal:

S. 2(42C) defines a ‘slump sale’ to mean the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales. A plain reading of s. 2(42C) makes it clear that to qualify as a slump sale, two conditions have to be satisfied viz., (i) there must be transfer of one or more undertakings as a result of sale and (ii) the sale should be for a lump sum consideration without values being assigned to the individual assets and liabilities. The presence of money consideration is an essential element to a transaction of sale. If the consideration is not money but some other valuable consideration it may be an exchange or barter but not a sale. In the present case, as no monetary consideration was received by the assessee for transfer of the assets and liabilities of the manufacturing division to Novapan Industries Ltd, the transaction is not a “slump sale” and does not attract s. 50B (Motors and General Stores 66 ITR 692 (SC), R.R. Ramakrishna Pillai 66 ITR 725 & Avaya Global Connect 26 SOT 397 (Mum) followed)

Yog trust is tax exempt; its main object is to impart training in Yoga, for education and curing of diseases

The predominant object of imparting Yoga training through well structured Yoga shivirs is to provide medical relief and impart education, which fall under the category of charitable objects defined under section 2(15).

The Tribunal held as under:

1) Yoga can be safely accepted as a system that fits into the definition of medical relief. As a science it is a well recognized system of medicine, which has therapeutic effects in treating serious ailments;

2) The predominant objective of the assessee-trust was to provide medical relief through Ayurveda and propagation of Yoga for the purpose of curing various diseases;

3) Any form of educational activity involving imparting of systematic training, to develop the knowledge, skill, mind and character of students is to be regarded as 'education', covered under section 2(15);

4) Thus, imparting of Yoga training through well structured Yoga shivirs would fall under the category of imparting education, which is one of the charitable objects defined under section 2(15);

5) The various other objectives of assessee-trust were merely ancillary to its main object, which was to provide medical relief and impart education and would not in any way constitute objectives of general public utility;

6) The proviso to section 2(15) applies only to trusts falling in the last limb of the definition of charitable purpose, that too if such trust carries on commercial activities in the nature of business, trade or commerce. The said proviso does not apply to a trust providing education and medical relief. Thus, revenue was not justified in refusing the exemption claimed by assessee-trust under sections 11 and 12 - DIVYA YOG MANDIR TRUST V. JCIT (2013) 37 taxmann.com 227 (Delhi - Trib.)

Latest Transfer Pricing: Finance Ministry Press Release Reg Safe Harbour Rules

The Ministry of Finance has issued a press release stating that the Safe Harbour Rules have been finalized after considering the comments of various stake holders. The significant aspect is that in case of transactions in the nature of routine ITES and ITS activities the earlier ceiling of Rs 100 crore has been removed. Transactions upto Rs. 500 crore have been provided safe harbour margin of 20% and transaction above Rs.500 crore have been provided safe harbour margin of 22%. 

 Similarly, the ceiling of Rs. 100 crore provided for transactions in the nature of corporate guarantee has been removed. Also, the rules provide for a time bound procedure for determination of the eligibility of the assessee and the international transactions. Any rejection of the option exercised by the assessee shall be by way of a reasoned order passed after hearing the assessee. The assessee shall have a right to file an objection with the Commissioner against adverse finding regarding the eligibility. The Commissioner shall thereafter decide about the validity of the option exercised by the assessee.

Sec. 147: Despite Sanction Reopening Void If Satisfaction Not Recorded: ITAT Mumbai

Amarlal Bajaj vs. ACIT (ITAT Mumbai)

S. 147/ 151: Merely writing “approved” in the sanction form without recording satisfaction renders the reopening void
The AO issued a notice u/s 147 and reopened the assessment on the ground that the assessee was the beneficiary of hawala entries in the form of loans, expenses & gifts. He alleged that the assessee had deposited unaccounted cash and received cheques in the form of loans, expenses, gifts. The CIT granted sanction u/s 151 to the reopening by writing the words “approved”. The assessee challenged the reopening on the ground that as satisfaction was not recorded by the CIT the sanction was without application of mind and void. HELD by the Tribunal allowing the appeal:

S. 147 and 148 are a charter to the Revenue to reopen earlier assessments and are, therefore protected by safeguards against unnecessary harassment of the assessee. They are sword for the Revenue and shield for the assessee. S. 151 guards that the sword of S. 147 may not be used unless a superior officer is satisfied that the AO has good and adequate reasons to invoke the provisions of S. 147. The superior authority has to examine the reasons, material or grounds and to judge whether they are sufficient and adequate to the formation of the necessary belief on the part of the assessing officer. If, after applying his mind and also recording his reasons, howsoever briefly, the Commissioner is of the opinion that the AO’s belief is well reasoned and bona fide, he is to accord his sanction to the issue of notice u/s 148 of the Act. In the instant case, we find from the perusal of the order sheet which is on record, the Commissioner has simply put “approved” and signed the report thereby giving sanction to the AO. Nowhere the Commissioner has recorded a satisfaction note not even in brief. Therefore, it cannot be said that the Commissioner has accorded sanction after applying his mind and after recording his satisfaction (Chhugamal Rajpal 79 ITR 603 (SC) & United Electrical Co 258 ITR 317 (Del) followed)

See also The Central India Electric Supply Co Ltd 51 DTR 51 (Del HC)

Setback to govt’s reconciliation talks with Vodafone

Pradeep Thakur,TNN | Sep 17, 2013, 06.46AM IST
NEW DELHI: The finance ministry's efforts to settle Vodafone's over $2 billion tax dispute through reconciliation has received a setback with the Law Commission likely to tell the government that amendments in the Arbitration and Reconciliation Act, as asked by the law ministry, may not help settle the case out of court.

The law ministry had asked the Law Commission to submit a report on suggestions to amend the Arbitration and Reconciliation Act where cases such as Vodafone's -- arising out of retrospective amendment in the Income Tax (I-T) Act — could be settled avoiding international arbitration.

The British telecom major wanted to settle the tax dispute under the United Nation's Commission on International Trade Law rules which India had rejected. The government had said any settlement would have to be strictly under Indian laws.

Sources in the Law Commission said any settlement with Vodafone could be made either through I-T's settlement commission or an amendment had to be brought in the I-T Act providing for reconciliation and settlement of tax disputes other than through the settlement commission.

Vodafone, however, has refused to go to the I-T's settlement commission as it will lose the right to any international arbitration once it approaches the commission. The government had earlier offered the telecom giant waiver of penalty if it approached the settlement commission and paid the tax dues and interest on it.

Also, if the company approaches the settlement commission, it has to deposit in advance all tax dues and interest on it before the case is listed for hearing. The government though had initiated conciliation talks between Vodafone's representatives and the law secretary.

The Law Commission was asked by the government to frame guidelines on arbitration and reconciliation so that it could bring in amendments in laws which could help it drag some of the multinational companies engaged in tax disputes to Indian courts and subject them to settlement.

The government has been demanding more than Rs 20,000 crore from Vodafone on account of tax, interest and penalty on gains made by Hutchison when it sold its India assets to the company in 2007. The company has, however, refused any offer of settlement of dispute under Indian laws.

At one point, the government was even contemplating bringing in a fresh clause in the retrospective amendment to I-T Act where tax demand raised on past cases could automatically get penalty waiver.

Vodafone had also won a case against the government in the Supreme Court in January 2012 which ruled that capital gains tax was not applicable to the company. The apex court had also asked the government to refund the telecom giant's Rs 2,500 crore with interest which it had paid against the tax dues.

CBDT Instruction On Procedure For Adjustment Of Refund Against Demand

Pursuant to the judgement of the Delhi High Court in Court on Its Own Motion vs. UOI 352 ITR 273, the CBDT has issued Instruction No. 12/2013 (F. NO. 312/55/2013-OT) dated 09.09.2013 stating that no refund should be adjusted without following the procedure prescribed in s. 245 of the Act of intimating the assessee of the proposed adjustment and considering his objections thereto.

“Instruction No. 12/2013 (F. NO. 312/55/2013-OT) dated 09.09.2013
Hon’ble Delhi High Court vide its judgment in case Court On Its Own Motion v. UOI in W.P.(C) 2659/2012, dated 14.3.2013 has issued seven Mandamus for action by the Income Tax Department. One Mandamus is on compliance of section 245 of the Income-tax Act, 1961.
2. The Hon’ble High Court in this context had issued interim directions vide its order dated 31-8-2012 as under:

“13. We issue interim direction to the respondents that they shall in future follow the procedure prescribed under section 245 before making any adjustment of refund payable by the CPC at Bengaluru. The assessees must be given an opportunity to file response or reply and the reply will be considered and examined by the Assessing Officer before any direction for adjustment is made. The process of issue of prior intimation and service thereof on the assessee will be as per the law. The assessees will be entitled to file their response before the Assessing Officer mentioned in the prior intimation. The Assessing Officer will thereafter examine the reply and communicate his finding, to the CPC, Bengaluru, who will then process the refund and adjust the demand, if any payable. CBDT can fix a time limit for communication of findings by the . Assessing Officer. The final adjustment will also be communicated to the assessees.”

3. In compliance with the above directions of the Hon’ble Court, CPC Instruction No. 1 dated 27.11.2012 was issued explaining the step by step procedure for adjustment of refunds to be followed by Assessing Officers and CPC, followed by the DIT(Systems)-III letter dated 30.1.2013.
4. Vide its final order in the Writ Petition dated 14.3.2013, the Hon’ble High Court in para 24 has confirmed its interim order and issued Second Mandamus as under:

“24. The said interim order is confirmed. We notice that the respondents have taken remedial steps to ensure compliance of section 245 of the Act as they now give an option to the assessee to approach the Assessing Officer. This is the second mandamus which we have issued. As noticed above, the interim order passed in the writ petition dated 31st August, 2012 has been implemented.”

5. In view of the above directions of the Hon’ble High Court, I am directed to convey that the provisions of section 245 of the IT Act be strictly adhered to before making any adjustment of refund. In respect of adjustment of refund payable by the CPC at Bengaluru, the procedure detailed in Para 2 above may be complied with. The Assessing Officer, in this regard, should respond to CPC within 45 days from the date of communication of issuance of notice u/s 245 by the CPC to the Assessing Officer.
6. I am further directed to state that the above be brought to notice of all officers working under your jurisdiction for necessary and strict compliance.”

High Court Explains Proper Scope Of S. 50C In Assessing Capital Gains

CIT vs. Chandra Narain Chaudhri (Allahabad High Court)

S. 50-C: Extent to which reliance can be placed by AO on stamp duty valuation explained
The assessee sold property for Rs. 25 lakhs. The AO held that as the property was valued by the stamp valuation officer at Rs. 78.48 lakhs and as the purchaser had paid stamp duty on that basis, the capital gain had to be worked out on that basis applying s. 50C(2). The assessee claimed that the property was tenanted and produced valuation reports to justify the sale consideration. On appeal by the assessee the CIT(A) held that the AO ought to have referred the matter to the DVO and directed him to adopt the value arrived at by an approved valuer. This was approved by the Tribunal. On appeal by the department to the High Court, HELD:
(i) S. 50-C is a rule of evidence in assessing the valuation of property for calculating capital gains and is rebuttable. It is well known that an immovable property may have various attributes, charges, encumbrances, limitations and conditions. The Stamp Valuation Authority does not take into consideration the attributes of the property for determining the fair market value and determines the value in accordance with the circle rates fixed by the Collector. The object of valuation by the Stamp Valuation Authority is to secure revenue on such sale and not to determine the true, correct and fair market value for which it may be purchased by a willing purchaser subject to and taking into consideration its situation, condition and other attributes such as it occupation by tenant, any charge or legal encumbrances;
(ii) If the assessee raises an objection that the value assessed by the stamp valuation authority u/s 50-C (1) exceeds the fair market value of the property on the date of transfer, the AO has to apply his mind on the validity of the objection and may either accept the valuation of the property on the basis of the report of the approved valuer filed by the assessee or invite refer the valuation of the capital asset to the DVO in accordance with s. 55-A. In all these events, the AO has to record valid reasons, which are justifiable in law. He is not supposed to adopt an evasive approach of applying the deeming provision without deciding the objection or referring the matter to the DVO u/s 55-A as a matter of course without considering the report of the approved valuer submitted by the assessee.

ITAT elucidates law on condonation of delay; arguments as to sufficient cause isn’t a license to file belated appeal

Liberal view in condoning delay is one of the guiding principles in the realm of belated appeals, which can't be equated with a license to file appeals at will-disregarding the time-limits fixed by the statutes

In the instant case the assessee moved an application before the FAA for condoning the delay in filing appeal. The FAA dismissed the appeal filed by assessee.

On appeal, the Tribunal explains basic principles of condonation of delay as under:

1) If sufficient causes for delay are presented, discretion is available to the FAAs to condone the delay and admit the appeal. The expression 'sufficient cause' is not defined, but it means a cause which is beyond the control of the assessee;

2) Any cause which prevents a person approaching the FAA within given time limit is considered as a sufficient cause. The test whether or not a cause is sufficient is to see whether it could have been avoided by the party by the exercise of due care and attention;

3) In every case of delay, there is some lapse on the part of the assessee. If there are no mala fides the FAA should consider the application of the assessee. But when there is reasonable ground to think that the delay was occasioned otherwise than a bonafide conduct, then the FAA should lean against acceptance of the explanation;

4) The application for condonation of delay should be supported by an affidavit, showing that there is sufficient cause for condonation. Condonation of delay, though an equitable relief, yet, cannot be accorded merely on sympathy or compassion and the grounds offered have to be evaluated to test whether the party in default had been guilty of conscious and deliberate inaction.

Based on the above principles it held in favour of revenue as under:

A) Adopting a liberal view in condoning delay is one of the guiding principles in the realm of belated appeals, but liberal approach cannot be equated with a license to file appeals at will-disregarding the time-limits fixed by the Statutes;

B) For a period of more than three years, assessee did not bother to find out the outcome of the appeal it had filed. The behaviour of the assessee could be termed as personified inaction and negligence which would not constitute reasonable cause;

C) Assessee, a corporate-assessee, filing returns of income of lacs of Rupees and assisted by highly qualified professionals couldn't take umbrella of ignorance of the provisions of law. Therefore, the order of FAA was to be upheld - PRASHANT PROJECTS LTD. V. DY. CIT (2013) 37 taxmann.com 137 (Mumbai - Trib.)