Friday, June 23, 2017

Timing of India Withholding Tax on Royalty/Technical Service Fees for overseas entities– the Dichotomy continues?

Withholding Tax in India is often perceived to be a challenging matter by many overseas entities having operations/activities in India. This may be on account of various reasons like lock up of funds in India (on account of taxes withheld) where a position of non taxability of income is adopted, mismatch between the year in which taxes are withheld by the Indian payer of income vs. the year in which the income is offered to tax in India, challenges with claiming credit for taxes withheld in India in the home country. 

One of the issues on which there has been some judicial debate is the point of time when withholding tax obligation triggers for an Indian payer of income in relation to a Royalty/Technical Service fee ('Service fee') payment proposed to be made to an overseas entity.

So as to set a context to the issue which is discussed in this article, to start with, it may be relevant to make a quick note of the fact that Sections 5 and 9 of the Income-tax Act, 1961 ('IT Act') are provisions dealing with scope of incomes chargeable to tax in India in principle, whereas, Section 145 of the IT Act governs the timing of taxation of the incomes in India (i.e. based on the cash or mercantile system of accounting regularly followed). Section 195 of the IT Act deals with withholding tax obligations in relation to payments proposed to be made to non-residents which are chargeable to tax in India.

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IFRS Exposure draft: Sales proceeds during testing of fixed asset to be recognised as other income

The International Accounting Standards Board (IASB) has proposed narrow-scope amendments to International Accounting Standards (IAS) 16 Property, Plant and Equipment. IAS 16 provides principles for recognition and measurement (initial & subsequent) of items of Property, Plant and Equipment (PPE) as assets. The proposed amendments include modification to the definition of directly attributable costs as cited in the para 17 of IAS 16.

As per clause (e) of para 17, directly attributable costs include costs of functionality testing of assets after deducting the net sale proceeds from items produced while bringing the asset to the location & condition necessary for it to be capable of operating in the manner as intended by the management.

Now, IASB has proposed amendments to the above component of directly attributable cost. As per the amendment, the net sale proceeds from such items produced should not be deducted from the costs of functionality testing of assets. To establish principle for treatment of such sale proceeds, a new para 20A has been proposed to be added to IAS 16.

According to the proposed new para 20A, the proceeds from selling such items produced while bringing the asset to that location & condition and production costs of such items should be recognised to profit or loss as per respective IAS/IFRS (International Financial Reporting Standards).

The above amendments have been proposed to reduce diversity in application of para 17 of IAS 16. These amendments would be applied both prospectively and retrospectively. An entity shall apply these amendments retrospectively only to the items property, plant & equipment brought to use as intended by the management only in the year in which the entity first applies these amendments. The Exposure Draft of proposed amendments would be open for public comment until October 19, 2017.

Not Really a Seamless Credit Mechanism – The Story of ‘Blocked Credits’

A seamless credit flow is the bedrock of an efficacious GST mechanism whereby cascading effect of taxes is eliminated through a chain of tax credits allowed for set off against output tax liability at each stage. With the introduction of GST regime in India, expectations were high on seamless availability of Input Tax Credits ('ITCs) on various business expenses such as employee insurance, business travel, rent-a-cab etc., that are
currently 'blocked' under the 'existing law'. Strangely enough, expectations were belied as these ITCs continue to be 'blocked' under the imminent GST regime. In brief, the taxpayer cannot avail ITCs on following important categories of expenditure under the GST regime: 

1) Motor vehicles (except for a few taxpayers like transporters, vehicle dealers etc);

2) Food & beverages and outdoor catering etc;

3) Health treatment, membership of fitness club etc;

4) Taxi/cab service, Insurance (except when required by law); and

5) Works contract services;

A perusal of the above list reveals that the situation has remained unchanged or become stricter as regards 'blocked credits' under the GST Regime.

Final notification on Sec. 10(38) brings clarity

Under the existing provisions of the Section 10(38) of the Income-tax Act ('the Act') income arising from a transfer of long-term capital asset, being equity share of a company, is exempt from tax if the sale has been undertaken on or after 1st October, 2004 and is chargeable to Securities Transactions Tax (STT).

It has been noticed that such exemption is being misused by declaring unaccounted income as exempt long-term capital gains (LTCG) after entering into sham transactions. With a view to prevent this abuse, Section 10(38) has been amended to provide that exemption shall be available only if the acquisition of share is chargeable to STT. Further, powers have been given to the CBDT to notify transactions which would be eligible for capital gains exemption even if no STT was paid on purchase of such shares. The CBDT then issued the draft notification and brought out the negative list of transactions on which such exemption would not be available. Now the CBDT has issued the final notification considering the representations of various stakeholders for entitlement to the capital gain exemption in genuine cases.

The final notification is similar to the draft notification in terms of prescribing negative list of transaction. However, relaxation has been given in interest of exemption in genuine cases.

Following three type of transactions will not enjoy capital gain exemption under Section 10(38):

a) Acquisition of listed equity share through a preferential allotment in a company whose equity shares are not frequently traded in stock exchange.

b) Acquisition of listed equity shares not through a recognized stock exchange.

c) Acquisition of equity shares of a company during the period of its delisting.

Ind AS 110: In case of mergers of subsidiaries, book values is to be taken as per standalone books

Query

A company, say P Ltd. is a parent company of two companies, say Q Ltd. & R Ltd. Q Ltd. & R Ltd. are under common control of P Ltd. In case of common control business combination, the assets, liabilities and reserves of the transferor (acquired) company is recognised at their book values in the books of the transferee(acquiree) company in accordance with Appendix C of Ind AS 103, Business Combinations.

Now, CBDT has notified new Rule 10CB which prescribes computation of interest income pursuant to secondary adjustment. Rule 10CB also provides that repatriation of excess money shall be made on or before 90 days from the:-

(A) Whether the book values should be as per the books of the companies merged or as per the consolidated books of parent company in following situations:

1. Q Ltd. merges with R Ltd.

2. Q Ltd. merges with P Ltd.

(B) Further, whether P Ltd. shall require to eliminate the effect of business combination in above two situations in the consolidated financial statement?

Response

(A)

Situation 1 : Appendix C, Business Combinations of Entities under Common Control of Ind AS 103 provides that accounting of merger of common control companies should be done as per the pooling of interest method. Under this method, assets, liabilities and reserves of the transfer or should be recognised in the books of the transferee at their carrying amounts without any adjustments except harmonisation of accounting policies of both companies in accordance with para 9 of Appendix C.

Para 11 of Appendix C states that the balance of retained earnings of the transferor is aggregated with that of the transferee. Further, the name of reserves, like general reserve, revaluation reserve etc. of the transferor should remain same in the book of transferee also in accordance with para 12 of Appendix C. Any difference between purchase consideration and share capital of the transferor is recognised as capital reserve separately from other capital reserves.

Accordingly, the book values or carrying amounts of assets, liabilities and reserves should be combined on the basis of standalone books of Q Ltd. and R Ltd., i.e. the merged companies.

Situation 2 : P Ltd. is holding company of Q Ltd. So, merger of P Ltd. with Q Ltd. will not have any effect. The assets, liabilities and reserves which were appearing in the consolidated financial statement of P Ltd. will not be part of standalone financial statement of P Ltd. Therefore, it would be appropriate to take carrying amounts of assets, liabilities and reserves of Q Ltd. as appearing in the consolidated financial statement of P Ltd.

(B)

As per para B86 of Ind AS 110, Consolidated Financial Statements, in consolidation procedure intra group assets and liabilities, equity, income, expense and cash flows relating to transactions between group companies should be eliminated in full. So, in the present case in both situations, P Ltd. should eliminate all effects of mergers in its consolidated financial statement.

Reference

Issue 2 of Ind AS Transition Facilitation Group Clarification Bulletin 9

Saturday, June 17, 2017

CBDT notifies rule for computing interest income for secondary adjustments under TP

In order to make the actual allocation of funds consistent with that of the primary transfer pricing adjustment, Finance Act, 2017 inserted Section 92CE in the Income-tax Act, 1961 to provide for secondary adjustment by attributing income to the excess money lying in the hands of the associated enterprise.

As a result of primary adjustment, if there is an increase in the total income or reduction in the loss of the assessee, excess money which is available with its AE will have to be repatriated to India and to the extent it is not repatriated, it shall be deemed to be an advance made by the assessee to the AE on which interest will have to be calculated. Now, CBDT has notified new Rule 10CB which prescribes computation of interest income pursuant to secondary adjustment. Rule 10CB also provides that repatriation of excess money shall be made on or before 90 days from the:-

1) Due date of filing of return if primary adjustment to TP has been made suo-moto by assessee;

2) Date of order of AO or appellate authority, if primary adjustment determined in the order has been accepted by assessee;

3) Due date of filing of return in case assessee had entered into Advance Pricing Agreement;

4) Due date of filing of return in case assessee opted for safe harbour rules under section 92CB;

5) Due date of filing of return in case an agreement is made under Mutual Agreement Procedure (MAP).

With regard to the rate of interest to be computed in the case of failure to repatriate the excess money with in the prescribed time limit, rule provides for separate interest rates for international transactions denominated in Indian rupee and those denominated in foreign currency. The rate of interest is on annual basis and shall be computed as follows:-

a) at one year marginal cost of fund lending rate of State Bank of India as on 1st of April of previous year plus 325 basis points in case international transaction is denominated in Indian rupees.

b) at six month London Interbank Offered Rate as on 30th September of previous year plus 300 basis points in the case international transaction is denominated in foreign currency.

Notification No. 52/2017, dated 15-06-2017

Review petition couldn’t be barred when SLP was to be dismissed: HC

Delhi High Court has held that a review petition could be maintainable before High Court after the Special Leave Petition (SLP) has been dismissed by the apex court and the aggrieved party could not be deprived of any statutory right of review. [2017] 82 taxmann.com 295 (Delhi)

Land appurtenant to building was entitled to sec. 54F relief even if no construction was done on It

Facts:

a) Assessee had sold shares and utilised long term capital gains from such sale of shares to purchase property which was comprised of land along with such building. He claimed exemption under section 54F.

b) Assessing Officer (AO) held that as per provisions of section 54F only investment in a residential house property is eligible for deduction. Land in one schedule had no residential building and therefore exemption under section 54F wasn’t available.

c) On appeal, CIT(A) allowed claim of assessee. Aggrieved-revenue filed the instant appeal before the Tribunal.

The Tribunal held in the favour of assessee as under:

1) As per Section 54F, exemption is allowable in respect of amount invested in construction of residential house property. Nothing is mentioned in Section 54F that deduction couldn’t be allowed on acquisition on land appurtenant to the building or on the land on which building is being constructed.

2) When the land was purchased and building was constructed thereon, it was not necessary that such construction should be on the entire plot of land, meaning thereby a part of the land which was appurtenant to the building and on which no construction was made, there was no denial of exemption on such investment.

3) Contention of revenue that exemption under section 54F was eligible only for construction of house wasn’t tenable. Exemption couldn’t be denied on the land appurtenant to building if all the other conditions of section 54F were satisfied. 

4) Thus, the cost of vacant land appurtenant to and forming part of the residential unit was to be considered for claim of exemption under section 54F even if no construction had been done on the appurtenant land. [2017] 82 taxmann.com 93 (Chennai)
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'Whats App’ didn’t abuse dominant position in market for instant messaging services: CCI

The Competition Commission has rejected the allegations of predatory pricing against WhatsApp in the market for instant messaging by stating that even though WhatsApp was in dominant position and it was not the only provider of consumer communication applications and consumer could be able to download other similar applications such as Viber, Snapchat, Hike, Hangouts, Chat On, etc. Therefore, allegations of predatory pricing have no substance and WhatsApp has not contravened any provisions of the Competition Act. - [2017] 82 taxmann.com 272 (CCI)

Aadhaar number must for filing tax return and linking PAN; CBDT clarifies effect of SC court verdict

Honorable Supreme Court in its landmark judgement has upheld Section 139AA of the Income Tax Act as constitutionally valid which requires quoting of the Aadhaar number in applying for PAN as well as for filing of income-tax returns.

Section 139AA(2) of the Income-tax Act provides that every person who has been allotted PAN as on the 1st day of July, 2017, and who is eligible to obtain Aadhaar, shall intimate his Aadhaar on or before a date to be notified by the Central Government. The proviso to section 139AA (2) provides that in case of non-intimation of Aadhaar, the PAN allotted to the person shall be deemed to be invalid from a date to be notified by the Central Government.

The Court also held that the “Parliament was fully competent to enact Section 139AA of the Act and its authority to make this law was not diluted by the orders of this Court.” 

CBDT clarifies the effect of the Apex Courts judgement as follows:

1) From July 1, 2017 onwards every person eligible to obtain Aadhaar must quote his Aadhaar number or Enrolment ID of Aadhaar no. for filing of income-tax returns as well as in applications for PAN;

2) Assessee’s who have been allotted PAN as on 01-07-2017, and who have Aadhaar no. or are eligible to obtain Aadhaar no., shall intimate their Aadhaar number to income-tax authorities.

3) However, for non-compliance of the above point No.(2), only a partial relief by the Court is that PAN of the person will not be cancelled for those who do not have Aadhaar and who do not wish to obtain Aadhaar number.

Ind AS 110: Dividend distribution tax paid by subsidiary is charged to consolidated profit or loss

Query

A wholly- owned subsidiary company, say B Ltd., paid dividend of Rs. 250,000 to its holding company, say A Ltd. Consequently, it paid Dividend Distribution Tax (DDT) of Rs. 25,000. Both companies have adopted Ind AS from April 1, 2017 and the payment ofdividend and DDT was made after the transition to Ind AS. 

The company now has following queries:-

a. How DDT should be accounted for in the consolidated financial statements for the year 2016-17?

b. Would answer in the above case be different if A Ltd, subsequently pays dividend of Rs. 12, 00,000 to its shareholders and DDT thereon of Rs. 95,000 after deducting DDT of Rs. 25,000 paid by B Ltd.?

c. Whether A Ltd. should recognise Deferred Tax Liability (DTL) in the consolidated financial statements on the undistributed profits of B Ltd. which may be distributed in the foreseeable future?

Response

a. At the time of consolidation, dividend income earned by A Ltd. and the corresponding entry in the equity of B Ltd. will get eliminated as consolidation adjustments. DDT of Rs. 25,000 paid by B Ltd. to the taxation authorities shall be debited and reflected in the consolidated statement of profit & loss. 

b. If holding company is allowed to adjust the DDT paid by subsidiary against its DDT liability then the sum of DDT paid by holding and DDT adjusted should be recognized in the consolidated statement of changes in equity. DDT paid by the subsidiary which has been adjusted by holding against its DDT liability, is nothing but a tax on distribution of dividend to the shareholders of holding company. Therefore, A Ltd. should recognize DDT of Rs. 120,000 to the consolidated statement of changes in equity.

c. As per paras 39 & 40 of Ind AS 12, Income Taxes, holding company should create DTL for all taxable temporary differences associated with investment in subsidiary only if it is determined that such temporary differences will be reversed in foreseeable future. Accordingly, A Ltd. is require to recognise DTL on the undistributed profit of B Ltd. ifit is already concluded that the undistributed profits will be distributed in foreseeable future. Such DTL may be reversed by the amount of DDT paid by B Ltd. when it will distribute such profits if such DDT is allowed to be set off against DDT liability of A Ltd. 

Reference
- Issue 1 of Ind AS Transition Facilitation Group Clarification Bulletin 9

Saturday, June 10, 2017

Sec. 54 relief was available even if investment was made in new property before execution of sale deed

The issue before the Chennai ITAT was as under:

Whether assessee would be eligible for Section 54F relief when he had invested the sale proceeds in construction of new flat even prior to execution of sale deed? 

The Chennai ITAT held as under:

1. Section 54 of the Income-Tax Act (the Act) clearly says that if the assessee, within a period of one year before or two years after the date on which the transaction took place, purchased or within a period of three years after that date, constructed a residential house in India, then the assessee is eligible for deduction under Section 54 of the Act.

2. In this case, the investment was admittedly made one year before the date of sale of property. In view of language employed by Parliament in Section 54 of the Act, it is not the requirement that the sale consideration has to be invested in purchase of property. It is immaterial whether the assessee invested the sale consideration in purchasing of new flat after the date of sale or one year before the sale of property.

3. In this case, the assessee invested the sale consideration one year before the sale of property, therefore, the assessee is eligible for deduction under Section 54 of the Act. - [2017] 82 taxmann.com 164 (Chennai - Trib.)

Ind AS Transition: Govt. grant in the nature of promoters’ contribution to be transferred to Other Equity

Query

A company, B Ltd. is a first-time adopter of Ind AS from April 1, 2017. One year ago, it received a contribution from the government (which holds 100% shareholding in B Ltd.) in the nature of promoters’ contribution. As per the previous GAAP, the contribution was recognized as capital reserve in accordance with AS 12, Accounting for Government Grants. 

The company has following queries:-

1) How the contribution shall be treated on transition to Ind AS?

2) How the contribution shall be treated under Ind AS if the same has been received after transition to Ind AS?

Response

Ind AS 20, Accounting for Government Grants and Disclosure of Government Assistance deals with the contributions made by the government. Ind AS 20 does not cover contributions made by a government in the capacity of shareholder. So, Ind AS 20 is applicable only when the contribution is provided as a government, not as a shareholder. Where the contribution is in the nature of government grant then as per Ind AS 101, Firsttime Adoption of Indian Accounting Standards, Ind AS 20 shall apply retrospectively to the grant. Ind AS 20 requires the government grant to be recognised as income over the periods in which related expenditure is recognised as expense to profit or loss.

Where the contribution is in the nature of shareholder contribution which is recognised in capital reserve under previous GAAP, such contributions (i.e. capital reserve) should be transferred to any appropriate category under “Other Equity” at the transition date in accordance with para 10 of Ind AS 101.

Accordingly, in the present case,

1) B Ltd. is required to transfer the balance of contribution received from the government in the nature of promoters’ contribution to appropriate category under “Other Equity” at the transition date.

2) There will be no change on treatment of the contribution even of it is received subsequent to the transition date.

Reference

- Issue 3 of Ind AS Transition Facilitation Group Clarification Bulletin 9

10 Key Takeaways of Draft Rules on Credit Transfer Document

There were lots of rumors afloat that Indian Companies planned to scale down their inventories ahead of GST rollout to limit their losses. Dealers were afraid of paying high GST rate without any claim to credit of excise in absence of duty paying document. The all-powerful GST council intends to introduce “Credit Transfer Document” which will allow them to take credit of duty paid under earlier law subject to some conditions. Moreover, it has also been decided to bring amendment to CCR Rules, 2004 to make Credit transfer document as eligible document for claiming credit.

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Replace this SLD ITAT lays down new mechanism to computer value of Rent Free Accommodation with this SLD ITAT lays down new mechanism to compute value of Rent Free Accommodation

Query

A company, say D Ltd. has adopted Ind AS voluntarily w.e.f April 1, 2015. In April, 2017, it purchased debentures of another company, E Ltd.

D Ltd. wants to know how interest on investment in debt of E Ltd. will be treated under Ind AS?

Response

The treatment of interest from investment in debt instrument depends upon the basis of subsequent measurement of investment, i.e. amortized cost, fair value through other comprehensive income or fair value through profit or loss.

(i) When the investment is measured at amortized cost, firstly interest revenue, calculated using the effective interest rate, should be added to the gross carrying amount of the investment. Subsequently, on receipt of interest from issuer of debt instrument, the amount of interest received shall be deducted from the gross carrying amount of the investment.

(ii) When the investment is measured at fair value through other comprehensive income, interest revenue from the investment should be recognized in the statement of profit & loss in accordance with paras 5.7.10 and 5.7.11 of Ind AS 109, Financial Instruments. In this case also, interest amount is calculated using effective interest rate.

(iii) When the investment is measured at fair value through profit or loss, an entity has the option either to adjust interest income with the fair value gains/losses or to recognize as income separately in accordance with para B5 (e) Ind AS 107, Financial Instruments: Disclosures.

Reference

- Issue 9 of Ind AS Transition Facilitation Group Clarification Bulletin 8

Tuesday, June 6, 2017

GST Council clears remaining two rules and all States agreeing for roll out of GST from July 1, 2017

The 15th GST council meeting held in New Delhi has cleared the two remaining rules, pertaining to transitions and returns. All the States has also agreed for roll-out of Goods and Service Tax (GST) from July 1, 2017. The Council has released the copy of return rules, return formats, mismatch formats and practitioner formats. Following are the download links:-




ITAT allowed sec. 54F relief to trust created for sole beneficiary of individual

The issue before the Tribunal was:

Whether a trust which was for the sole benefit of an individual was entitled to deduction under section 54F or not, when its status was that of AOP?

The Tribunal held in favour of trust as under:

1) As per section 54F the benefit of this section is available to individual or Hindu undivided family (HUF).The jurisdictional High Court in the case of Mrs. Amy F. Cama v. CIT [1994] 237 ITR 82 (Bom.) had elaborately considered the same issue. The High Court was dealing with trust's claim for deduction of purchase price of the flat from capital gain as per section 54. It was held that the trust was entitled to the same.

2) The High Court had held that section 161, makes a representative assessee subject to the same duties, responsibilities and liabilities as if the income was received by him beneficially. The fiction was created as it was never the object or intention of the Act to charge tax upon persons other than the beneficial owner of the income. Whatever benefits the beneficiary will get in the said assessment must be made available to the trustee while assessing him under section 161.

3) The above decision of the High Court would squarely apply in the present case, when one was concerned with the issue of exemption under section 54F as Section 54 was also applicable to individuals and HUF.

4) In the instant case, the issue was benefit of investment made in purchase of flat for deduction under section 54F by the trustees and the sole beneficiary of the trust was the individual 'V'. Hence, the ratio emanating from the above jurisdictional High Courts decision was squarely applicable to the facts of the case.

5) Hence, It was clear that it was only by virtue of section 161 that trust had been assessed for the income that was for benefit of sole beneficiary. Accordingly, following the precedent, trust was principally entitled to deduction under section 54F. - [2017] 81 taxmann.com 367 (Mumbai - Trib.)

Trust not hit by proviso to sec. 2(15) due to selling cow's milk if main object of trust was to take care of cows

DIT (Exemptions) v. Shree Nashik Panchvati Panjrapole [2017] 81 taxmann.com 375 (Bombay)

Facts:

a) The object of assessee-trust was to run, inter alia, a Panjrapole, i.e., protection of cow and oxen. It also used to sell mil procured from the cows to the general public at nominal rate.

b) DIT (E) cancelled assessee-trust's registration by invoking section 12AA(3) on the ground that its income by way of sale of milk, interest and dividend was in excess of Rs. 10 lakhs and, therefore, would casese to be a charitable trust.

c) The Tribunal held that the activity of selling milk by a Panjarapole would not by itself make the proviso to section 2(15) applicable. Further, it held that selling milk would be incidental in running a Panjarapole.

d) Aggrieved-revenue filed the instant appeal before the High Court.

The High Court held in favour of assessee as under:-

1. The dominant function of the Trust was to provide an asylum to old, maimed, sick and stray cows. Further, only 25 per cent of the cows being looked after yielded milk and if the milk was not procured, it could be detrimental to the health of the cows. Therefore, the milk obtained and sold by the trust was an activity incidental to its primary/principal activity.

2. In the instant case, the activity of milking the cows and selling the milk was almost binding on the trust, in the process of giving asylum to the cows. The activity to be considered in the nature of trade, commerce or business would in most cases have to be carried out on a regular basis with a view to earn the profit.

3. The presence of the profit intent would normally be a sine qua non for the activity to be considered as trade, commerce or business. Therefore, in the present facts, it was not as though the keeping of the cows and milking them was with a view to carry out an activity in the nature of trade, commerce or business to earn profits.

4. Admittedly, the dominant activity carried out by the trust was to take care of old, sick and disabled cows. In these circumstances, an incidental activity of selling milk which might have resulted in receipt of money, by itself would not make it trade, commerce or business nor an activity in the nature of trade, commerce or business to be hit by the proviso to section 2(15) - [2017] 81 taxmann.com 375 (Bombay)

Form 15G/15H to be filed once in a year and not every time when payment is due; CBDT clarifies

Section 197A of the Income-tax Act provides that tax shall not be deducted, if the recipient of certain payment on which tax is deductible furnishes to the payer a selfdeclaration in Form No. 15G/15H in accordance with provisions of the said section. The manner of filing such declarations and the particulars have been given in Rule 29C of the Income-tax Rules, 1962.

The Central Board of Direct Taxes (CBDT) had received various representations seeking clarifications on the issue as to whether a depositor should submit only one declaration in respect of the income each year or whether Form 15G/15H has to be submitted each time the payment is due to be received from the deductor.
CBDT has now settled the issue and clarified that it will be sufficient if only one declaration is made in respect of the income each year before each deductor.

Notification no. 6 of 2017, dated 30-05-2017

Black money in third party bank account can be subject to search and seizure: Delhi HC

The issue before the High Court was:

Whether the undisclosed money in third party bank account can be subject to search and seizure?

Delhi High Court held as under:

1) Section 132(1)(c) permits search to be under taken by the Department if there is reason to believe that a person is in possession "of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed" for the purposes of the Act, referred to as "the undisclosed income or property".

2) The second proviso to Section 132(1) read with Section 132(3) permits the Department to ask bank to freeze bank account that is subject to search and seizure since it may not be possible "to take physical possession" immediately of such "valuable article or thing and remove it to a safe place.

3) Therefore, a sum in a bank account is not outside ambit of section 132(1) and can be subject to search and seizure as a person can be in possession of undisclosed income not only in his or her own account but in someone else's account. [2017] 81 taxmann.com 408 (Delhi)

ITAT condoned delay in filing of appeal as delay occurred due to death of assessee’s counsels

Facts:

a) Assessee filed his appeal before the ITAT with a considerable delay beyond the time limit prescribed under section 253(3).

b) He requested for condonation of delay on ground that there were various casualties/deaths and medical contingencies of the persons connected with the him to represent his case.

Tribunal held in favour of assessee as under:

1) The relevant averments of the assessee as contained in application for condonation of delay duly supported by an affidavit that the CA who was representing the Income-tax matters unfortunately got expired. Then the matter was being looked after by assessee's younger brother.

2) Unfortunately even his younger brother got expired. Subsequently, the papers were handed over to an advocate who he did not file the appeals and at the same time he also got expired. Besides, during the aforesaid period the assessee was suffering from heart diseases and ultimately he underwent angiography, in-between, the assessee's mother got expired.

3) Then assessee appointed a new CA in November 2016, unfortunately he met with an accident and was bedridden for three months. He was able to walk only sometime in February, 2017 end and then the matter was pursued by him and the appeal was ultimately filed.

4) Assessee had sufficiently explained that the he was prevented by sufficient and bona fide cause in filing this appeal within time prescribed by law. 

5) Since delay in filing appeal took place due to consecutive casualties/deaths and medical contingencies of assessee's counsels, delay was to be condoned. [2017] 81 taxmann.com 298 (Mumbai - Trib.)