Monday, April 17, 2017

AO rightly treated bank as an assessee -in-default for allowing LTA claim to its employee travelling abroad


a) A survey was conducted on nationalized bank under section 133A to verify the TDS compliance in the case of salary and perquisite payments made to its employees. 

b) Assessing Officer (AO) noticed that bank had allowed LTC exemption to its employeesfor the foreign travel. AO treated bank as an 'assessee-in-default' under section 201(1) for making short-deduction of tax.

c) CIT(A) confirmed the order of AO, aggrieved-assessee filed instant appeal before the Tribunal.

Tribunal held in favour of revenue as under:

1) As per the provisions of section 10(5), only the reimbursement of expenses which are incurred on travel of employees and their families to any place in India are exempt. Since the employees of the Bank had travelled to foreign countries, the benefit of exemption available under section 10(5) should not have been granted.

2) Though bank may not have been aware of the details of the employees' places visited or destination at the time of advancement of LTC amounts. Yet, at the final settlement of the claims of the employees under LTC, bank should have obtained all the relevant details, such as the places of visits (destinations), etc.

3) Thus, the bank was aware of the fact that its employees had visited foreign countries by availing of LTC concession. So they were not entitled for to reimbursement of LTC.Thus, bank was under an obligation to deduct tax at source treating such an amount as not exempt.

4) Since the bank had failed to enforce its duty to deduct tax at source under section 192, AO correctly treated Bank as an 'assessee-in-default'. - [2017] 80 179 (Bangalore - Trib.)

‘Taxmann’ invites taxpayers to submit their practical difficulties faced in case of ITRs and TDS matters

‘All Gujarat Federation of Tax Consultants’ felt an urgent need for effective resolution of practical issues being faced by the taxpayers. Thus, it is organizing an open house at Ahmedabad to have meaningful interactions with concerned CPC authorities with a view to achieve effective resolution of several practical difficulties being faced by the taxpayers in relation to following activities:

A) Filing of e-returns, processing of ITRs and rectifications, issue of tax refunds, computation of interest, adjustment of tax demands against refunds, etc., handled by CPC (ITD) Bengaluru.

B) Filing and processing of TDS returns, grant of due credit and reconciliation of TDS or TCS and related issues dealt with by CPC (TRACES) Ghaziabad. 

The taxpayers and tax practitioners are requested to send their practical difficulties faced by April 17, 2017 at which can be placed before CPC authorities at the open house.

Following departmental authorities will deal with such practical difficulties at the open house:

DGIT (System) – Shri S.S. Rathor

CIT-CPC (ITR) – Shri R. K. Mishra

CIT-CPC (TDS) – Shri Sunil C. Sharma

Delay in payment under IDS due to demonetization unacceptable- HC dismisses writ


a) The petitioner had filed a declaration under the Income Declaration Scheme, 2016 (IDS) declaring total undisclosed income of Rs.11.59 crores.

b) He was unable to deposit the amount of Rs.1.19 crores being 25% of income declared which he was required to deposit before 30th November, 2016 under IDS in view of the demonetization of Rs.500/- and Rs.1000/-currency notes on 8th November, 2016.

c) Thus, he filed writ before the High Court seeking a direction to the Revenue to accept Rs.1.19 crores which he was unable to deposit on or before 30th November, 2016.

High Court held as under:

1) There was no provision under the IDS or in the rules made there under which would permit the revenue to accept payment of tax after due date.

2) High Court couldn’t issue any such directions as the revenue authorities were obliged to act in accordance with the Income Declaration Scheme, 2016 which was a part of the Finance Act, 2016

3) It must be borne in mind that the IDS was optional and the dates of payment were known at the time of filing the declaration. Therefore, filing writ seeking direction to accept payment of tax after due date wasn’t maintainable. [2017] 80 167 (Bombay)

CBDT introduces digitally signed E-PAN card for applicants

Central Board of Direct Taxes (CBDT) has introduced the electronic PAN Card (E-PAN) which would be sent by email to all applicants in addition to issue of the physical PAN Card.

E-PAN would be digitally-signed which can be submitted by applicant as a proof of identity to other agency electronically directly or by storing in the government's Digital Locker.

Further, in order to improve the Ease of Doing Business for newly incorporated companies, CBDT has tied up with Ministry of Corporate Affairs (MCA) to issue PAN and TAN in one day.

Applicant companies have to submit a common application form SPICe (INC 32) on MCA portal. Once the data of incorporation is sent to CBDT by MCA, the PAN and TAN would be issued immediately without any further intervention of the applicant. Till 31st March 2017, 19,704 newly incorporated Companies were allotted PAN in this manner. During March, 2017, out of the 10,894 newly incorporated companies, PAN was allotted within 4 hrs in 95.63% cases and within 1 day in all cases. Similarly, TAN was allotted to all such companies within 4 hrs in 94.7 % cases and within 1 day in 99.73% cases, CBDT clarified.

Press Release dated 11-08-2017

Power of attorney holder can also file a complaint for dishonoring of cheque: HC

In general, a person who is entitled to prefer a complaint for dishonoring of cheque under the Negotiable Instrument Act, 1881 must be a “payee or a holder in due course” but law does not insist on that payee or holder in due course should personally file a complaint. His duly authorized power of attorney can also file a complaint on his behalf if cheque is issued in discharge of a legally enforceable debt.

Therefore, filing of complaint in respect of an offence under section 138 of the Negotiable Instrument Act is permissible through holder of power of attorney. - [2017] 80 72 (Madras)

Bar Council of India can’t remand disciplinary proceedings transferred to it from State Bar Council: SC

The Disciplinary Committee of Gujarat Bar Council of India (BCI) could not complete its proceedings within a year as mandated under the provision of the Advocacy Act, 1961, as a consequence of which disciplinary proceeding had been transferred to the Bar Council of India. However, the BCI’s Disciplinary Committee got back the case to the State Bar Council with a direction to dispose of the matter within a stipulated period of time.

Being aggrieved by the action of Bar Council of India, Appellant filed a case before the Apex Court. It was held that when a disciplinary proceeding before a State Bar Council gets transferred to Bar Council of India (BCI) under the provision of the Advocates Act, 1961, the BCI cannot send it back to the State Bar Council with a direction to decide it within a stipulated time. - [2017] 80 54 (SC)

‘Quasi-capital’ loan not to be compared with ‘loan’ for ALP computation


a) Assessee had advanced an optionally convertible loan to its associated enterprise (AE). The tenure of loan was five years and the lender had the option for repayment or for conversion of loan into equity at par with the company at any time during the tenure of the loan.

b) Assessee did not provide for any interest on said loan. TPO was of the view that merely because loan was convertible into equity, it did not alter its character as loan at the relevant point of time, and once that was so, the benchmarking of loan was to be done as per the prevailing market rate.

c) TPO made addition to assessee's ALP in respect of interest on loan to AE. 

d) The DRP confirmed said addition. Aggrieved-assessee filed the instant appeal before the Tribunal.

Tribunal held in favour of assessee as under:-

1) The transaction in question was not of the transaction of lending money to AE. Amount advanced to the AE was attached with the obligation of the AE to issue share capital, in case the assessee exercised option for the same, on certain conditions, which were admittedly more favourable, and at an agreed price, which was admittedly much lower, vis-à-vis the conditions and price which independent enterprise would normally agree to accept.

2) The lending was thus in the nature of quasi-capital in the sense that substantive reward, or true consideration, for such a loan transaction was not interest simplictor on amount advanced but opportunity to own capital on certain favourable terms. 

3) Usually loan transactions are benchmarked on the basis of interest rate applicable on the loan transactions simplictor which, under the transfer pricing regulations, cannot be compared with a transaction which is something materially different than a loan simplictor. For example, a non-refundable loan which is to be converted into equity. It is in this context that the loans, which are in the nature of quasi-capital, are treated differently than the normal loan transactions.

4) However, what the authorities had held that a quasi-capital transaction can be compared with a simple loan transaction where sole motivation and consideration for the lender is the interest on such loan.

5) Keeping in mind these factors, as also entirety of the case, it was fit and proper to delete the arm's length price adjustment in respect of interest which, according to the revenue authorities, assessee should have charged on the optionally convertible loan granted to the AEs. - [2017] 80 24 (Ahmedabad - Trib.)