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”.

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.)

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.