Central Government has announce the Holiday list for 2011.
Central Government Holiday list for 2011
1. Republic Day - January 26, Wednesday
2. Independence Day – 15th August, Monday
3. Mahatma Gandhi's Birthday- 2nd October, Sunday
4. Budha Purnima – 17th May, Tuesday
5. Christmas Day – 25th December, Sunday
6. Dussehra - 6th October, Thursday
7. Diwali (Deepavali) – 26th October, Wednesday
8. Good Friday – 22nd April, Friday
9. Guru Nanak's Birthday – 10th November, Thursday
10. Idu'l Fitr – 31st August, Wednesday
11. Idu'l Zuha – 7th November, Monday
12. Mahavir Jayanti – 16th April, Saturday
13. Muharram- 6th December, Tuesday
14. Prophet Mohammad's Birthday (Id-E-Milad) – 16th February, Wednesday
15. Maha Shivaratri- 2nd March, Wednesday
16. Janamashtami (Vaisnava)- 22nd August, Monday
17. Ram Navami- 12th April, Tuesday
List of Restricted Holidays for 2011 Delhi
1. New Year's Day - January 01, Saturday
2. Guru Gobind Singh's Birthday - January 05, Wednesday
3. Makar Sankranti –January 14, Friday
4. Pongal -January 15, Saturday
5. Basant Panchami - February 08, Tuesday
6. Guru Ravidas' Birthday - February 18, Friday
7. Shivaji Jayanti - February 19, Saturday
8. Swami Dayanand Saraswati Jayanti - February 27, Sunday
9. Holika Dahan (Dol yatra) - March 19, Saturday
10. Holi - March 20, Sunday
11. Chaitra Sukladi/ Gudi/Padava/Ugadi/ Cheti Chand - April 04, Monday
12. Vaisakhi - April 14, Thursday
13. Easter Sunday - April 24, Sunday
14. Guru Rabindranath's Birthday - May 09, Monday
15. Hazrat Ali's Birthday - June 16, Thursday
16. Rath Yatra - July 03, Sunday
17. Raksha Bandhan - August 13, Saturday
18. Ganesh Chaturthi - September 01 , Thursday
19. Onam - September 09, Friday
20. Maharishi Valmiki's Birthday - October 11, Tuesday
21. Bhai Duj - October 28, Friday
22. Guru Teg Bahadur's Martyrdom Day - November 24 Thursday
Wednesday, December 29, 2010
REVISION 264
REVISION 264
Subject matter
of revision revise
Any order passed by the officer subordinate to CIT Exception:
1. Applies to an order other than an order to which S. 263 applies.
2. Where appeal lies before CIT (A) / ITAT or the time limit for filing the appeal has not expired.
WHO CAN - CIT
Time limit
a) If CIT revises on his motion-1 year
b) If assessee makes an application-1 year from date of communication/knowledge of the order (CIT has power to condone delay), order to be passed within one year from the end of the F.Y in which application is made.
Remarks
1. The provision can be beneficially used by the Assessee for seeking appropriate relief from CIT where certain claims, relief could not be claimed before the AO or appeal could not be filed before CIT(A) in time for any reason.
2. Application by the Assessee to be accompanied by a fee of Rs.500.
3. An order cannot be said to have been made subject to an (effective) appeal if the appeal has been disposed of by CIT(A) or ITAT without passing an order on merits.
4. S. 264 is enacted for the benefit of the Assessee. Order u/s 264 can not be prejudicial to Assessee.
5. The order of CIT u/s 264 is not appealable before ITAT u/s 253 or High Court u/s 260A. However, a petition for Writ of Certiorari under Article 226 of the Constitution for quashing the order of CIT will lie in appropriate cases.
Commissioner of Income Tax, Rajkot Vs. Shatrusailya Digvijaysingh Jadeja [2005] Insc 460 (1 September 2005)
B.P. Singh & S.H. Kapadia Kapadia, J.
The question which arises for determination in this civil appeal filed by the department is whether the department was right in rejecting the Kar Vivad Samadhan Scheme declarations filed by the respondent-assessee on the ground that the assessments had become final in the year 1992-93 (when the assessee's appeals were dismissed for failure to pre-deposit self-assessed tax) and that the respondent herein had filed revisions under the Income Tax Act and Wealth Tax Act in November/December, 1998 only to obtain the benefit of Kar Vivad Samadhan Scheme, 1998, which came into force w.e.f. 1.9.1998. According to the department, the revisions filed by the assessee were time barred and as such they were not "pending" in terms of section 95(i)(c) of the said Scheme.
The undisputed facts which lie within a very narrow compass are as follows:
In respect of assessment years 1984-85 to 1991-92, the assessee was liable to pay tax under assessment orders passed vide section 143(3) of the Income Tax Act, 1961 and also under the assessment orders passed under the Wealth Tax Act, 1957.
Being aggrieved by the assessment orders, the assessee herein, preferred appeals to the Commissioner (A) under section 246 of the said Act. However, the assessee failed to pre-deposit the self-assessed tax and consequently, the appeals came to be dismissed in the year 1992-93.
The Finance (No.2) Act, 1998 introduced a scheme called Kar Vivad Samadhan Scheme (for short "the Scheme").
The said Scheme was contained in Chapter IV of the Finance Act and consisted of sections 86 to 98 (both inclusive). The said scheme came into force w.e.f. 1.9.1998 in respect of tax arrears outstanding as on 31.3.1998 and was in force up to 31.1.1999.
On 28/29.12.1998, the assessee herein filed appeals and revisions as mentioned in the statement given herein below:
STATEMENT OF APPEALS AND REVISION PETITION VIS-@-VIS DECLARATIONS
IN RESPECT OF KVSS UNDER INCOME TAX ACT.
Assessment year Appeals/ Revision Petition Filed Date of filing of Appeal / Revision Petition Date of filing KVSS declaration Date of order on KVSS Declarations Status on KVSS declarations Date of order on application for condonation of delay in filing of Appeal/ Revision Status on the application for condonation of delay in filing Appeal/ Revision 1980-81 Appeal 13/15.01.99 Last Week of Jan., 1999 15/22/23.2.99 & 5.3.99 Accepted Delay condoned 1981-82 Appeal 13/15/01.99 Last Week of Jan., 1999 15/22/23.2.99 & 5.3.99 Accepted Delay condoned 1984-85 Revision 26.11.98 to 8.12.1998 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not condoned 1985-86 Revision 26.11.98 to 8.12.1998 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not condoned 1986-87 Revision 26.11.98 to 8.12.1998 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not condoned 1987-88 Revision 26.11.98 to 8.12.1998 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not condoned 1988-89 Appeal 13/15.01.99 Last Week of Jan., 1999 15/22/23.2.99 & 5.3.99 Accepted Delay condoned 1988-89 Revision 26.11.98 to 8.12.1998 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not condoned 1989-90 Appeal 13/15.01.99 Last Week of Jan., 1999 15/22/23.2.99 & 5.3.99 Accepted Delay condoned 1989-90 Revision 26.11.98 to 8.12.1998 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not condoned 1990-91 Appeal 13/15.01.99 Last Week of Jan., 1999 15/22/23.2.99 & 5.3.99 Accepted Delay condoned 1990-91 Revision 26.11.98 to 8.12.1998 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not condoned 1991-92 Appeal 13/15.01.99 Last Week of Jan., 1999 15/22/23.2.99 & 5.3.99 Accepted Delay condoned 1991-92 Revision 26.11.98 to 8.12.1998 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not condoned 1992-93 Appeal 13/15.01.99 Last Week of Jan., 1999 15/22/23.2.99 & 5.3.99 Accepted Delay condoned 1993-94 Appeal 13/15.01.99 Last Week of Jan., 1999 15/22/23.2.99 & 5.3.99 Accepted Delay condoned On the above facts, the department's case before us is that the scheme was enacted to resolve the pending litigation;
that the purpose of the scheme was not to create artificial pendency of litigation; that the revisions were not pending on 1.9.1998 when the scheme came into force as the revisions were filed in November and December, 1998 along with applications for condonation of delay and consequently, such revisions did not come within the meaning of the word "pendency" as mentioned in section 95(i)(c) of the said Scheme. On behalf of the department, it was further pleaded that under the IT Act, there was a difference between an appeal and a revision; that the remedy of filing an appeal is available to an assessee under section 246 as a matter of right whereas the remedy of filing revision under section 264 was a discretionary remedy.
On facts, it was pleaded that the revisions filed by the assessee were not bonafide as the appeals under section 246 stood dismissed in the year 1992-93 for failure to pre-deposit self- assessed tax; that the revisions filed were also not bona fide as they were filed only to obtain the benefit of the said scheme;
that the revisions were filed under section 264 before the commissioner after a long delay and they were rightly dismissed by the commissioner subsequently for want of sufficient cause to condone the delay.
Shri K.P. Pathak, learned ASG appearing on behalf of the department would submit that the scheme was a self-contained Code; that it stood on its own force different from the Income Tax Act/Wealth Tax Act; that the intention of the Scheme as reflected in the speech of former finance minister indicated that the purpose of the Scheme was to bring to an end pending litigation and not to create an artificial litigation in respect of assessments which had attained finality. In this connection, learned counsel pointed out that in the present case the department had in fact resorted to execution proceedings and a part of the arrears was also realized through the auction sale of the lands of the assessee and, therefore, there was no bona fide pendency of litigation on the date when the assessee filed his declarations under the Scheme. The learned counsel submitted that there was a difference between an appeal under section 246 and revisions under section 264 of the IT Act; that under the proviso to section 264, the commissioner was empowered to condone the delay in filing of revision if he was satisfied that the assessee was prevented by sufficient cause from preferring the revision within the prescribed time.
It was submitted that the revision petition was not pending in terms of section 95(i)(c) of the Scheme; that the delay in filing the revisions was not condoned and, consequently, the assessee was not eligible to take the benefit of the scheme. In this connection, learned counsel placed reliance on the judgment of this Court in the case of Computwel Systems P. Ltd v. W. Hasan & Another reported in (2003) 260 ITR 86.
Per contra, Shri M.L.Varma, learned senior counsel appearing on behalf of the assessee submitted that revisions and appeals were filed by the assessee along with the condonation applications; that, however, declarations pertaining to the assessment years covered by the appeals under sections 246 were accepted by the designated authority (for short "DA") under the Scheme though the applications for condonation of delay were pending decision whereas the DA rejected the declarations filed by the assessee covered by the revisions without waiting for the commissioner to exercise his authority to condone the delay under the proviso to section 264 of the IT Act. Learned counsel made the grievance that no reason has been given by the department for rejecting one set of declarations concerning revisions under section 264 while accepting declarations concerning appeals under section 246 of the IT Act, though in both the cases, applications for condonation of delay were filed and pending.
On the question of law, learned counsel invited our attention to section 95(i)(c) and submitted that the scheme was a Code by itself; that the object of the scheme was to recover the taxes locked in the pending litigation and for the purposes of the applicability of the scheme, appeals, references, revisions, writ petitions pertaining to the tax cases were all put at par under section 95(i)(c) of the Scheme. It was urged on behalf of the assessee that if a revision or an appeal was pending on the date of the filing of the declaration under the Scheme, it was not open to the DA to hold that the appeals/revisions were sham, ineffective or infructuous. In this connection, reliance was placed on the judgment of this Court in the case of Dr. Mrs. Renuka Datla & Others v. Commissioner of Income-Tax & Another reported in (2003) 259 ITR 258.
The basic point which we are required to consider in this case is the meaning of the word "pending" in section 95(i)(c) of the said Scheme.
The object of the scheme was to make an offer by the Government to settle tax arrears locked in litigation at a substantial discount. It provided that any tax arrears could be settled by declaring them and paying the prescribed amount of tax arrears, and it offered benefits and immunities from penalty and prosecution. In several matters, Government found that large number of cases were pending at the recovery stage and, therefore, the Government came out with the said Scheme under which it was able to unlock the frozen assets and recover the tax arrears.
In our view, the Scheme was in substance a recovery scheme though it was nomenclatured as a "litigation settlement scheme" and was not similar to the earlier Voluntary Disclosure Scheme. As stated above, the said Scheme was a complete Code by itself. Its object was to put an end to all pending matters in the form of appeals, reference, revisions and writ petitions under the IT Act/WT Act. Keeping in mind the above object, we have to examine section 95(i)(c) of the Scheme, which was different from appeals under section 246, revisions under section 264, appeals under section 260A etc. of the IT Act and similar provisions under the W.T. Act. Under the I.T. Act, there is a difference between appeals, revisions and references. However, those differences were obliterated and appeals, revisions and references were put on par under section 95(i)(c) of the Scheme. The object behind section 95(i)(c) in putting on par appeals, references and revisions was to put an end to litigation in various forms and at various stages under the IT Act/Wealth Tax Act and, therefore, the rulings on the scope of appeals and revisions under the IT Act or on Voluntary Disclosure Scheme, will not apply to this case.
One more aspect needs to be looked into. The Finance (No.2) Act, 1998 introduced a Scheme called Kar Vivad Samadhan Scheme, 1998. It was a recovery scheme. Under the Scheme, the tax arrear had to be outstanding as on 31.3.1998.
Under section 87(f), "disputed tax" was defined to mean total tax determined and payable under the IT Act/Wealth Tax Act in respect of an assessment year but which remained unpaid as on the date of making of the declaration from which TDS, self- assessed tax, advanced tax paid, if any, had to be deducted under section 90; the DA had to determine the amount payable and for that purpose, he had to determine the tax arrear as well as the disputed amount as defined under section 87(f). Thus, the DA had to make an assessment of tax arrears, disputed amount and amount payable for each year of assessment; that appeal was barred against the order under section 90 (see section 92);
that such determination had to be done within 60 days from the receipt of the declaration and based thereon the DA had to issue a certificate. In other words, till the completion of the aforestated exercise, the appellant could not have paid the amount of tax and, therefore, the appellant was not liable to pay interest as his liability accrued only after the ascertainment of the amount payable under section 90. In the present matter, that exercise has been completed; that taxes have been recovered by sale of lands; that amounts have been paid pursuant to the determination by the DA, may be under the orders of the High Court and, therefore, we do not wish to reopen the matter.
In the case of Dr. Mrs. Renuka Delta (supra), this Court has held on interpretation of section 95(i)(c) that if the appeal or revision is pending on the date of the filing of the declaration under section 88 of the Scheme, it is not for the DA to hold that the appeal/revision was "sham", "ineffective" or "infructuous" as it has.
In the case of Raja Kulkarni v. The State of Bombay reported in AIR 1954 SC 73, this Court laid down that when a section contemplates pendency of an appeal, what is required for its application is that an appeal should be pending and in such a case there is no need to introduce the qualification that it should be valid or competent. Whether an appeal is valid or competent is a question entirely for the appellate court before whom the appeal is filed to decide and this determination is possible only after the appeal is heard but there is nothing to prevent a party from filing an appeal which may ultimately be found to be incompetent, e.g., when it is held to be barred by limitation. From the mere fact that such an appeal is held to be unmaintainable on any ground whatsoever, it does not follow that there was no appeal pending before the Court.
To the same effect is the law laid down by the judgment of this Court in the case of Tirupati Balaji Developers (P) Ltd. v. State of Bihar & Others reported in (2004) 5 SCC 1, in which it has been held that an appeal does not cease to be an appeal though irregular and incompetent.
For the aforestated reasons, orders of the designated authority rejecting the declarations filed by the assessee are quashed. We do not find any infirmity, to this extent, in the impugned judgment of the High Court. The appeal is accordingly dismissed, with no order as to costs.
0
Subject matter
of revision revise
Any order passed by the officer subordinate to CIT Exception:
1. Applies to an order other than an order to which S. 263 applies.
2. Where appeal lies before CIT (A) / ITAT or the time limit for filing the appeal has not expired.
WHO CAN - CIT
Time limit
a) If CIT revises on his motion-1 year
b) If assessee makes an application-1 year from date of communication/knowledge of the order (CIT has power to condone delay), order to be passed within one year from the end of the F.Y in which application is made.
Remarks
1. The provision can be beneficially used by the Assessee for seeking appropriate relief from CIT where certain claims, relief could not be claimed before the AO or appeal could not be filed before CIT(A) in time for any reason.
2. Application by the Assessee to be accompanied by a fee of Rs.500.
3. An order cannot be said to have been made subject to an (effective) appeal if the appeal has been disposed of by CIT(A) or ITAT without passing an order on merits.
4. S. 264 is enacted for the benefit of the Assessee. Order u/s 264 can not be prejudicial to Assessee.
5. The order of CIT u/s 264 is not appealable before ITAT u/s 253 or High Court u/s 260A. However, a petition for Writ of Certiorari under Article 226 of the Constitution for quashing the order of CIT will lie in appropriate cases.
Commissioner of Income Tax, Rajkot Vs. Shatrusailya Digvijaysingh Jadeja [2005] Insc 460 (1 September 2005)
B.P. Singh & S.H. Kapadia Kapadia, J.
The question which arises for determination in this civil appeal filed by the department is whether the department was right in rejecting the Kar Vivad Samadhan Scheme declarations filed by the respondent-assessee on the ground that the assessments had become final in the year 1992-93 (when the assessee's appeals were dismissed for failure to pre-deposit self-assessed tax) and that the respondent herein had filed revisions under the Income Tax Act and Wealth Tax Act in November/December, 1998 only to obtain the benefit of Kar Vivad Samadhan Scheme, 1998, which came into force w.e.f. 1.9.1998. According to the department, the revisions filed by the assessee were time barred and as such they were not "pending" in terms of section 95(i)(c) of the said Scheme.
The undisputed facts which lie within a very narrow compass are as follows:
In respect of assessment years 1984-85 to 1991-92, the assessee was liable to pay tax under assessment orders passed vide section 143(3) of the Income Tax Act, 1961 and also under the assessment orders passed under the Wealth Tax Act, 1957.
Being aggrieved by the assessment orders, the assessee herein, preferred appeals to the Commissioner (A) under section 246 of the said Act. However, the assessee failed to pre-deposit the self-assessed tax and consequently, the appeals came to be dismissed in the year 1992-93.
The Finance (No.2) Act, 1998 introduced a scheme called Kar Vivad Samadhan Scheme (for short "the Scheme").
The said Scheme was contained in Chapter IV of the Finance Act and consisted of sections 86 to 98 (both inclusive). The said scheme came into force w.e.f. 1.9.1998 in respect of tax arrears outstanding as on 31.3.1998 and was in force up to 31.1.1999.
On 28/29.12.1998, the assessee herein filed appeals and revisions as mentioned in the statement given herein below:
STATEMENT OF APPEALS AND REVISION PETITION VIS-@-VIS DECLARATIONS
IN RESPECT OF KVSS UNDER INCOME TAX ACT.
Assessment year Appeals/ Revision Petition Filed Date of filing of Appeal / Revision Petition Date of filing KVSS declaration Date of order on KVSS Declarations Status on KVSS declarations Date of order on application for condonation of delay in filing of Appeal/ Revision Status on the application for condonation of delay in filing Appeal/ Revision 1980-81 Appeal 13/15.01.99 Last Week of Jan., 1999 15/22/23.2.99 & 5.3.99 Accepted Delay condoned 1981-82 Appeal 13/15/01.99 Last Week of Jan., 1999 15/22/23.2.99 & 5.3.99 Accepted Delay condoned 1984-85 Revision 26.11.98 to 8.12.1998 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not condoned 1985-86 Revision 26.11.98 to 8.12.1998 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not condoned 1986-87 Revision 26.11.98 to 8.12.1998 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not condoned 1987-88 Revision 26.11.98 to 8.12.1998 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not condoned 1988-89 Appeal 13/15.01.99 Last Week of Jan., 1999 15/22/23.2.99 & 5.3.99 Accepted Delay condoned 1988-89 Revision 26.11.98 to 8.12.1998 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not condoned 1989-90 Appeal 13/15.01.99 Last Week of Jan., 1999 15/22/23.2.99 & 5.3.99 Accepted Delay condoned 1989-90 Revision 26.11.98 to 8.12.1998 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not condoned 1990-91 Appeal 13/15.01.99 Last Week of Jan., 1999 15/22/23.2.99 & 5.3.99 Accepted Delay condoned 1990-91 Revision 26.11.98 to 8.12.1998 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not condoned 1991-92 Appeal 13/15.01.99 Last Week of Jan., 1999 15/22/23.2.99 & 5.3.99 Accepted Delay condoned 1991-92 Revision 26.11.98 to 8.12.1998 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not condoned 1992-93 Appeal 13/15.01.99 Last Week of Jan., 1999 15/22/23.2.99 & 5.3.99 Accepted Delay condoned 1993-94 Appeal 13/15.01.99 Last Week of Jan., 1999 15/22/23.2.99 & 5.3.99 Accepted Delay condoned On the above facts, the department's case before us is that the scheme was enacted to resolve the pending litigation;
that the purpose of the scheme was not to create artificial pendency of litigation; that the revisions were not pending on 1.9.1998 when the scheme came into force as the revisions were filed in November and December, 1998 along with applications for condonation of delay and consequently, such revisions did not come within the meaning of the word "pendency" as mentioned in section 95(i)(c) of the said Scheme. On behalf of the department, it was further pleaded that under the IT Act, there was a difference between an appeal and a revision; that the remedy of filing an appeal is available to an assessee under section 246 as a matter of right whereas the remedy of filing revision under section 264 was a discretionary remedy.
On facts, it was pleaded that the revisions filed by the assessee were not bonafide as the appeals under section 246 stood dismissed in the year 1992-93 for failure to pre-deposit self- assessed tax; that the revisions filed were also not bona fide as they were filed only to obtain the benefit of the said scheme;
that the revisions were filed under section 264 before the commissioner after a long delay and they were rightly dismissed by the commissioner subsequently for want of sufficient cause to condone the delay.
Shri K.P. Pathak, learned ASG appearing on behalf of the department would submit that the scheme was a self-contained Code; that it stood on its own force different from the Income Tax Act/Wealth Tax Act; that the intention of the Scheme as reflected in the speech of former finance minister indicated that the purpose of the Scheme was to bring to an end pending litigation and not to create an artificial litigation in respect of assessments which had attained finality. In this connection, learned counsel pointed out that in the present case the department had in fact resorted to execution proceedings and a part of the arrears was also realized through the auction sale of the lands of the assessee and, therefore, there was no bona fide pendency of litigation on the date when the assessee filed his declarations under the Scheme. The learned counsel submitted that there was a difference between an appeal under section 246 and revisions under section 264 of the IT Act; that under the proviso to section 264, the commissioner was empowered to condone the delay in filing of revision if he was satisfied that the assessee was prevented by sufficient cause from preferring the revision within the prescribed time.
It was submitted that the revision petition was not pending in terms of section 95(i)(c) of the Scheme; that the delay in filing the revisions was not condoned and, consequently, the assessee was not eligible to take the benefit of the scheme. In this connection, learned counsel placed reliance on the judgment of this Court in the case of Computwel Systems P. Ltd v. W. Hasan & Another reported in (2003) 260 ITR 86.
Per contra, Shri M.L.Varma, learned senior counsel appearing on behalf of the assessee submitted that revisions and appeals were filed by the assessee along with the condonation applications; that, however, declarations pertaining to the assessment years covered by the appeals under sections 246 were accepted by the designated authority (for short "DA") under the Scheme though the applications for condonation of delay were pending decision whereas the DA rejected the declarations filed by the assessee covered by the revisions without waiting for the commissioner to exercise his authority to condone the delay under the proviso to section 264 of the IT Act. Learned counsel made the grievance that no reason has been given by the department for rejecting one set of declarations concerning revisions under section 264 while accepting declarations concerning appeals under section 246 of the IT Act, though in both the cases, applications for condonation of delay were filed and pending.
On the question of law, learned counsel invited our attention to section 95(i)(c) and submitted that the scheme was a Code by itself; that the object of the scheme was to recover the taxes locked in the pending litigation and for the purposes of the applicability of the scheme, appeals, references, revisions, writ petitions pertaining to the tax cases were all put at par under section 95(i)(c) of the Scheme. It was urged on behalf of the assessee that if a revision or an appeal was pending on the date of the filing of the declaration under the Scheme, it was not open to the DA to hold that the appeals/revisions were sham, ineffective or infructuous. In this connection, reliance was placed on the judgment of this Court in the case of Dr. Mrs. Renuka Datla & Others v. Commissioner of Income-Tax & Another reported in (2003) 259 ITR 258.
The basic point which we are required to consider in this case is the meaning of the word "pending" in section 95(i)(c) of the said Scheme.
The object of the scheme was to make an offer by the Government to settle tax arrears locked in litigation at a substantial discount. It provided that any tax arrears could be settled by declaring them and paying the prescribed amount of tax arrears, and it offered benefits and immunities from penalty and prosecution. In several matters, Government found that large number of cases were pending at the recovery stage and, therefore, the Government came out with the said Scheme under which it was able to unlock the frozen assets and recover the tax arrears.
In our view, the Scheme was in substance a recovery scheme though it was nomenclatured as a "litigation settlement scheme" and was not similar to the earlier Voluntary Disclosure Scheme. As stated above, the said Scheme was a complete Code by itself. Its object was to put an end to all pending matters in the form of appeals, reference, revisions and writ petitions under the IT Act/WT Act. Keeping in mind the above object, we have to examine section 95(i)(c) of the Scheme, which was different from appeals under section 246, revisions under section 264, appeals under section 260A etc. of the IT Act and similar provisions under the W.T. Act. Under the I.T. Act, there is a difference between appeals, revisions and references. However, those differences were obliterated and appeals, revisions and references were put on par under section 95(i)(c) of the Scheme. The object behind section 95(i)(c) in putting on par appeals, references and revisions was to put an end to litigation in various forms and at various stages under the IT Act/Wealth Tax Act and, therefore, the rulings on the scope of appeals and revisions under the IT Act or on Voluntary Disclosure Scheme, will not apply to this case.
One more aspect needs to be looked into. The Finance (No.2) Act, 1998 introduced a Scheme called Kar Vivad Samadhan Scheme, 1998. It was a recovery scheme. Under the Scheme, the tax arrear had to be outstanding as on 31.3.1998.
Under section 87(f), "disputed tax" was defined to mean total tax determined and payable under the IT Act/Wealth Tax Act in respect of an assessment year but which remained unpaid as on the date of making of the declaration from which TDS, self- assessed tax, advanced tax paid, if any, had to be deducted under section 90; the DA had to determine the amount payable and for that purpose, he had to determine the tax arrear as well as the disputed amount as defined under section 87(f). Thus, the DA had to make an assessment of tax arrears, disputed amount and amount payable for each year of assessment; that appeal was barred against the order under section 90 (see section 92);
that such determination had to be done within 60 days from the receipt of the declaration and based thereon the DA had to issue a certificate. In other words, till the completion of the aforestated exercise, the appellant could not have paid the amount of tax and, therefore, the appellant was not liable to pay interest as his liability accrued only after the ascertainment of the amount payable under section 90. In the present matter, that exercise has been completed; that taxes have been recovered by sale of lands; that amounts have been paid pursuant to the determination by the DA, may be under the orders of the High Court and, therefore, we do not wish to reopen the matter.
In the case of Dr. Mrs. Renuka Delta (supra), this Court has held on interpretation of section 95(i)(c) that if the appeal or revision is pending on the date of the filing of the declaration under section 88 of the Scheme, it is not for the DA to hold that the appeal/revision was "sham", "ineffective" or "infructuous" as it has.
In the case of Raja Kulkarni v. The State of Bombay reported in AIR 1954 SC 73, this Court laid down that when a section contemplates pendency of an appeal, what is required for its application is that an appeal should be pending and in such a case there is no need to introduce the qualification that it should be valid or competent. Whether an appeal is valid or competent is a question entirely for the appellate court before whom the appeal is filed to decide and this determination is possible only after the appeal is heard but there is nothing to prevent a party from filing an appeal which may ultimately be found to be incompetent, e.g., when it is held to be barred by limitation. From the mere fact that such an appeal is held to be unmaintainable on any ground whatsoever, it does not follow that there was no appeal pending before the Court.
To the same effect is the law laid down by the judgment of this Court in the case of Tirupati Balaji Developers (P) Ltd. v. State of Bihar & Others reported in (2004) 5 SCC 1, in which it has been held that an appeal does not cease to be an appeal though irregular and incompetent.
For the aforestated reasons, orders of the designated authority rejecting the declarations filed by the assessee are quashed. We do not find any infirmity, to this extent, in the impugned judgment of the High Court. The appeal is accordingly dismissed, with no order as to costs.
0
Delay not ground for dismissing petition- SC
Delay not ground for dismissing petition- SC
Submitted by : caupdate08 on dated Friday, December 17th, 2010
The Supreme Court (SC) stated last week that courts should not dismiss petitions of revenue authorities only on the ground of delay, without going into the merits of the case. In this case, the Commissioner of Income Tax appealed to the SC against the order of the Calcutta high court which dismissed its petition because the revenue authorities came beyond the time limit set by the Limitation Act. The high court did not examine the pleas of the tax authorities in the case involving a company, West Bengal Infrastructure Development Corporation.
The amount claimed against the corporation was Rs 4 crore. The order of the SC, passed by Chief Justice S H Kapadia, asked the high court to reconsider the case by hearing and deciding the contention of the tax authorities. The court was taking strict action recently against delayed appeals by revenue authorities, but in tax cases, it might be beneficial to the companies as the merits would be forgotten. Therefore the courts are advised to use their discretion wisely to deal with delayed appeals.
Submitted by : caupdate08 on dated Friday, December 17th, 2010
The Supreme Court (SC) stated last week that courts should not dismiss petitions of revenue authorities only on the ground of delay, without going into the merits of the case. In this case, the Commissioner of Income Tax appealed to the SC against the order of the Calcutta high court which dismissed its petition because the revenue authorities came beyond the time limit set by the Limitation Act. The high court did not examine the pleas of the tax authorities in the case involving a company, West Bengal Infrastructure Development Corporation.
The amount claimed against the corporation was Rs 4 crore. The order of the SC, passed by Chief Justice S H Kapadia, asked the high court to reconsider the case by hearing and deciding the contention of the tax authorities. The court was taking strict action recently against delayed appeals by revenue authorities, but in tax cases, it might be beneficial to the companies as the merits would be forgotten. Therefore the courts are advised to use their discretion wisely to deal with delayed appeals.
Deemed Dividend s. 2(22)(e)
Deemed Dividend s. 2(22)(e)
s. 2(22)(e) Deemed Dividend If Lending Not Trivial: Bombay High Court
The following important judgement is available for download at itatonline.org.
CIT vs. Parle Plastics Ltd (Bombay High Court)
S. 2(22)(e) applicable only to loans given in the year. S. 2(22)(e) not applicable if lending is not “trivial” part of business
The assessee availed of loans and advances of Rs. 2.18 crores from a closely held company (“AMPL”) of which Rs. 11.68 lakhs was received during the year. As the shareholders holding majority of the share capital in the assessee also held the majority of the shareholding in AMPL, the AO took the view that the said loan / advance was assessable as “deemed dividend” u/s 2(22)(e) in the hands of the assessee. The CIT (A) confirmed the view of the AO though he held that only the loan / advance received during the year was assessable as “deemed dividend” and not the brought forward balance. On appeal by the assessee, the Tribunal deleted the addition on the ground that the granting of loans was a substantial part of the business of AMPL and so the loan could not be treated as ”deemed income” in the hands of the assessee. On appeal by the department, HELD dismissing the appeal:
(i) S. 2(22)(e) covers only the amount received during the previous year by way of loans / advances and not amounts received in an earlier year. Further, increase in the outstanding on account of provision for interest is not covered;
(ii) S. 2(22)(ii) excludes loans and advances where (a) the loan or advance was made by the lending-company in the ordinary course of its business and (ii) lending of money is a “substantial part” of the business of the lending-company. The first condition was satisfied as the business of the assessee was complimentary to the business of AMPL. As regards the second condition, the expression “substantial part” does not connote an idea of being the “major part” or the part that constitutes majority of the whole. Any business which the company does not regard as small, trivial, or inconsequential as compared to the whole of the business is substantial business. Various factors and circumstances such as turnover, profit, employees, capital employed etc are required to be looked into while considering whether a part of the business of a company is a “substantial part of its business”;
(iii) On facts, as about 40% of the total assets of AMPL were deployed by way of loans and advances, and its interest income was substantial compared to the total income, lending of money was a “substantial part of its business” and the money given by it by way of loan / advance was excluded from the definition of “dividend” under s. 2(22)(ii).
CIT vs. Parle Plastics Ltd (Bombay High Court)
(143.9 KiB, 93 DLs)
S. 2(22)(e) applicable only to loans given in the year. S. 2(22)(e) not applicable if lending is not “trivial” part of business
The assessee availed of loans and advances of Rs. 2.18 crores from a closely held company (“AMPL”) of which Rs. 11.68 lakhs was received during the year. As the shareholders holding majority of the share capital in the assessee also held the majority of the shareholding in AMPL, the AO took the view that the said loan / advance was assessable as “deemed dividend” u/s 2(22)(e) in the hands of the assessee. The CIT (A) confirmed the view of the AO though he held that only the loan / advance received during the year was assessable as “deemed dividend” and not the brought forward balance. On appeal by the assessee, the Tribunal deleted the addition on the ground that the granting of loans was a substantial part of the business of AMPL and so the loan could not be treated as ”deemed income” in the hands of the assessee. On appeal by the department, HELD dismissing the appeal:
Related Judgements
1. Perot Systems TSI vs. DCIT (ITAT Delhi)
The argument that notional interest income cannot be assessed is not acceptable in the context of transfer pricing. S 92(1) provides that any income arising from an international transaction has to be computed having regard to the arm’s length price. S. 92B (1) defines an “international transaction” to mean…
2. Munjal Sales vs. CIT (Supreme Court)
(i) A firm seeking to claim deduction of interest paid on capital from its partners has to first satisfy the requirements of s. 36(1)(iii) and thereafter the limits imposed by s. 40(b)(iv). The fact that the said capital is not “loans” or “advances” is irrelevant. (ii) Where loans…
3. DLF Universal vs. DCIT (ITAT Delhi Special Bench)
S. 45 (3) applies when a capital asset is introduced into a firm as capital contribution. This provision applies also when stock-in-trade is introduced into a firm because the transaction is on the capital account and stock-in-trade does not retain its character as stock-in-trade at the point of time…
s. 2(22)(e) Deemed Dividend If Lending Not Trivial: Bombay High Court
The following important judgement is available for download at itatonline.org.
CIT vs. Parle Plastics Ltd (Bombay High Court)
S. 2(22)(e) applicable only to loans given in the year. S. 2(22)(e) not applicable if lending is not “trivial” part of business
The assessee availed of loans and advances of Rs. 2.18 crores from a closely held company (“AMPL”) of which Rs. 11.68 lakhs was received during the year. As the shareholders holding majority of the share capital in the assessee also held the majority of the shareholding in AMPL, the AO took the view that the said loan / advance was assessable as “deemed dividend” u/s 2(22)(e) in the hands of the assessee. The CIT (A) confirmed the view of the AO though he held that only the loan / advance received during the year was assessable as “deemed dividend” and not the brought forward balance. On appeal by the assessee, the Tribunal deleted the addition on the ground that the granting of loans was a substantial part of the business of AMPL and so the loan could not be treated as ”deemed income” in the hands of the assessee. On appeal by the department, HELD dismissing the appeal:
(i) S. 2(22)(e) covers only the amount received during the previous year by way of loans / advances and not amounts received in an earlier year. Further, increase in the outstanding on account of provision for interest is not covered;
(ii) S. 2(22)(ii) excludes loans and advances where (a) the loan or advance was made by the lending-company in the ordinary course of its business and (ii) lending of money is a “substantial part” of the business of the lending-company. The first condition was satisfied as the business of the assessee was complimentary to the business of AMPL. As regards the second condition, the expression “substantial part” does not connote an idea of being the “major part” or the part that constitutes majority of the whole. Any business which the company does not regard as small, trivial, or inconsequential as compared to the whole of the business is substantial business. Various factors and circumstances such as turnover, profit, employees, capital employed etc are required to be looked into while considering whether a part of the business of a company is a “substantial part of its business”;
(iii) On facts, as about 40% of the total assets of AMPL were deployed by way of loans and advances, and its interest income was substantial compared to the total income, lending of money was a “substantial part of its business” and the money given by it by way of loan / advance was excluded from the definition of “dividend” under s. 2(22)(ii).
CIT vs. Parle Plastics Ltd (Bombay High Court)
(143.9 KiB, 93 DLs)
S. 2(22)(e) applicable only to loans given in the year. S. 2(22)(e) not applicable if lending is not “trivial” part of business
The assessee availed of loans and advances of Rs. 2.18 crores from a closely held company (“AMPL”) of which Rs. 11.68 lakhs was received during the year. As the shareholders holding majority of the share capital in the assessee also held the majority of the shareholding in AMPL, the AO took the view that the said loan / advance was assessable as “deemed dividend” u/s 2(22)(e) in the hands of the assessee. The CIT (A) confirmed the view of the AO though he held that only the loan / advance received during the year was assessable as “deemed dividend” and not the brought forward balance. On appeal by the assessee, the Tribunal deleted the addition on the ground that the granting of loans was a substantial part of the business of AMPL and so the loan could not be treated as ”deemed income” in the hands of the assessee. On appeal by the department, HELD dismissing the appeal:
Related Judgements
1. Perot Systems TSI vs. DCIT (ITAT Delhi)
The argument that notional interest income cannot be assessed is not acceptable in the context of transfer pricing. S 92(1) provides that any income arising from an international transaction has to be computed having regard to the arm’s length price. S. 92B (1) defines an “international transaction” to mean…
2. Munjal Sales vs. CIT (Supreme Court)
(i) A firm seeking to claim deduction of interest paid on capital from its partners has to first satisfy the requirements of s. 36(1)(iii) and thereafter the limits imposed by s. 40(b)(iv). The fact that the said capital is not “loans” or “advances” is irrelevant. (ii) Where loans…
3. DLF Universal vs. DCIT (ITAT Delhi Special Bench)
S. 45 (3) applies when a capital asset is introduced into a firm as capital contribution. This provision applies also when stock-in-trade is introduced into a firm because the transaction is on the capital account and stock-in-trade does not retain its character as stock-in-trade at the point of time…
Discrepancies Noted by Peer Reviewers ICAI
Discrepancies Noted by Peer Reviewers ICAI
Peer Review is directed towards maintenance and enhancement of quality of attestation services and to provide guidance to members to improve their performance and adhere to various statutory and other regulatory requirements. Essentially, through a review of attestation service engagement records, peer review identifies the areas where a practicing member may require guidance in improving the quality of his performance and adherence to various requirementsas per applicable Standards. The main objective of Peer Review is to ensure that in carrying out their attestation service assignments; the Practice Unit should (a) comply with the Technical Standards, Ethical Standards and Professional Standards laid down by the Institute and (b) have in place proper systems including documentation systems, for maintaining the quality of the attestation services work they perform for their clients.
While reviewing, the work of Practice Unit the peer reviewers have noted discrepancies which may be non compliance of various Standard issued by ICAI (i) AAS3/SA 230 (Documentation) (ii)AAS 5/SA 500 (Audit Evidence) (iii)AAS 6/SA 315 (Risk Assessment and Internal Control) (iv)AAS 7/SA 610 (Relying upon the work of an Internal Auditor) (v)AAS 8/SA 300 (Audit Planning) (vi)AAS 14/SA 520 (Analytical Procedures) (vii)AAS 15/SA 530 (Audit Sampling) (viii)AAS 17/SA 220 (Quality Control of Audit Work) (ix)AAS 23/SA 550 (Related Parties) (x) AAS 29 (Auditing in a Computer Information System Environment). (xi) AAS 11/SA 580 (Representation by
Management) (xii) AAS 10/SA 630 (using work of another Auditor).
It is also noted that the financial statements have not included all the disclosures required by the technical standards and PU does not have a practice obtaining representation from the management on matters material to the financial information, Non evidence for Articles Diaries/Statement are being maintained and verified by Partner/Incharge, Independence policies and procedure has been made available, however, the same is neither signed by the partner nor communicated to partner as well as the employees. Further working papers such as photo copies of office expenses, challans, TDS Certificate, Insurance, Payable Bills obtained without satisfactory attestation of parties. The review of the audit work performed by each audit assistant by the Seniors/ Partners is not being documented to show the evidence of work conducted as per laid policies or performed in accordance with Audit Programme or no Management Representation letters are obtained and duly kept in record.
Other discrepancies include that the Practice Unit has not separately maintained the current and permanent files of working papers for attestation services Letter of Appointment of the Auditors was not obtained from their clients. Further Working papers not properly arranged as required by SA 230 (AAS 3) of Documentation and there is no proper system of Indexation and cross referencing and also there is no Audit plan and Audit Programme documented. No Practice of issuing engagement letter as required by SA 210 (AAS 26) terms of Audit Engagement and no policy & procedures found in place to ensure independence.
Keeping in view these discrepancies, the Practice Units may ensure such compliance by taking various corrective actions. A system of maintenance of permanent and current files where basic and fundamental documents form part of the permanent file and yearly routine/general working papers form part of current file which may be properly maintained in an organised manner. Proper documentation should be done with regard to audit programmes, and evidences/details on major issues obtained during the audit function are made part of the working papers. A checklist may be prepared before the commencement of the audit and most of the issues which have to be generally checked and items which have to be specifically checked for the clients may be clearly mentioned in the same. The audit Programs should be properly drafted with details of audit work, to be carried out along with audit Schedule and system of filing of important working papers. The staff and article must maintain diaries showing their daily work report and records of professional education being maintained. It should be ensured that there is a system of continuing professional education for staff and regular staff meeting is held in the offices to impart necessary training. Records of CPE Hrs and programmes attended by qualified staff should be properly maintained The Practice Units may ensure that the cited deficiencies may be kept in view to avoid deviations and shortfalls. Proactive approach in this regard would help in improving the quality of professional services being rendered to the clients by the Practice firms.
Peer Review is directed towards maintenance and enhancement of quality of attestation services and to provide guidance to members to improve their performance and adhere to various statutory and other regulatory requirements. Essentially, through a review of attestation service engagement records, peer review identifies the areas where a practicing member may require guidance in improving the quality of his performance and adherence to various requirementsas per applicable Standards. The main objective of Peer Review is to ensure that in carrying out their attestation service assignments; the Practice Unit should (a) comply with the Technical Standards, Ethical Standards and Professional Standards laid down by the Institute and (b) have in place proper systems including documentation systems, for maintaining the quality of the attestation services work they perform for their clients.
While reviewing, the work of Practice Unit the peer reviewers have noted discrepancies which may be non compliance of various Standard issued by ICAI (i) AAS3/SA 230 (Documentation) (ii)AAS 5/SA 500 (Audit Evidence) (iii)AAS 6/SA 315 (Risk Assessment and Internal Control) (iv)AAS 7/SA 610 (Relying upon the work of an Internal Auditor) (v)AAS 8/SA 300 (Audit Planning) (vi)AAS 14/SA 520 (Analytical Procedures) (vii)AAS 15/SA 530 (Audit Sampling) (viii)AAS 17/SA 220 (Quality Control of Audit Work) (ix)AAS 23/SA 550 (Related Parties) (x) AAS 29 (Auditing in a Computer Information System Environment). (xi) AAS 11/SA 580 (Representation by
Management) (xii) AAS 10/SA 630 (using work of another Auditor).
It is also noted that the financial statements have not included all the disclosures required by the technical standards and PU does not have a practice obtaining representation from the management on matters material to the financial information, Non evidence for Articles Diaries/Statement are being maintained and verified by Partner/Incharge, Independence policies and procedure has been made available, however, the same is neither signed by the partner nor communicated to partner as well as the employees. Further working papers such as photo copies of office expenses, challans, TDS Certificate, Insurance, Payable Bills obtained without satisfactory attestation of parties. The review of the audit work performed by each audit assistant by the Seniors/ Partners is not being documented to show the evidence of work conducted as per laid policies or performed in accordance with Audit Programme or no Management Representation letters are obtained and duly kept in record.
Other discrepancies include that the Practice Unit has not separately maintained the current and permanent files of working papers for attestation services Letter of Appointment of the Auditors was not obtained from their clients. Further Working papers not properly arranged as required by SA 230 (AAS 3) of Documentation and there is no proper system of Indexation and cross referencing and also there is no Audit plan and Audit Programme documented. No Practice of issuing engagement letter as required by SA 210 (AAS 26) terms of Audit Engagement and no policy & procedures found in place to ensure independence.
Keeping in view these discrepancies, the Practice Units may ensure such compliance by taking various corrective actions. A system of maintenance of permanent and current files where basic and fundamental documents form part of the permanent file and yearly routine/general working papers form part of current file which may be properly maintained in an organised manner. Proper documentation should be done with regard to audit programmes, and evidences/details on major issues obtained during the audit function are made part of the working papers. A checklist may be prepared before the commencement of the audit and most of the issues which have to be generally checked and items which have to be specifically checked for the clients may be clearly mentioned in the same. The audit Programs should be properly drafted with details of audit work, to be carried out along with audit Schedule and system of filing of important working papers. The staff and article must maintain diaries showing their daily work report and records of professional education being maintained. It should be ensured that there is a system of continuing professional education for staff and regular staff meeting is held in the offices to impart necessary training. Records of CPE Hrs and programmes attended by qualified staff should be properly maintained The Practice Units may ensure that the cited deficiencies may be kept in view to avoid deviations and shortfalls. Proactive approach in this regard would help in improving the quality of professional services being rendered to the clients by the Practice firms.
CONDONE DELAY - SC CASE
CONDONE DELAY - SC CASE
CIT Vs west Bengal infrastructure Devel corp, SC
Courts not to dismiss petitions of revenue authorities only due to delay, without going into Merits of case.
CONDONE DELAY Danny Denzongpa
In matters giving benefit to assessee, dept must avoid Technical Approach - HC relief for actor Danny Denzongpa
Court : Bombay High Court
Brief : The Bombay High Court has directed the income tax commissioner to reconsider the applications of Bollywood actor Danny Denzongpa alias Tshering Pintso for tax exemptions on dividends and interests since 1997-98 under section 10(26AAA) as incorporated in the Finance Act, which entitled tax exemptions to Sikkimese nationals on dividends and interest on securities. A division bench of the high court has set aside the order passed by the income-tax commissioner rejecting nine applications filed by Denzongpa seeking the exemptions as per the amendment to the Finance Act in 2008.
Citation : Danny Denzongpa (Alias Tshering Pintso) Versus Commissioner of Income Tax & Others
Judgement :
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
• Danny Denzongpa Alias Tshering Pintso) VERSUSCommissioner of Income Tax
• WRIT PETITION NO.1549 OF 2010, 1550 OF 2010, 1552 OF 2010, 1554 OF 2010, 1555 OF 2010, 1561 OF 2010, 1641 OF 2010, 1658 OF 2010
• DATE: ¬ 20thSeptember, 2010
• JUDGMENT (PER SHRI R.M.SAVANT)
1 Rule. With the consent of the parties made returnable forthwith and heard.
2 The above Writ Petition and the companion writ Petitions challenge the orders all dated 04/03/2010 rejecting the applications filed by the Petitioner under Section 264 of the Income Tax Act, 1962 (brevities sake referred to as the said Act) in respect of the Assessment years covered by each of the petitions. Since the orders passed under Section 264 of the said Act are identical and since the Petitions involving a common question, they are all heard together and disposed of.
3 The facts as disclosed above in each of the Petitions are as under:
The Petitioner is an Indian National of Sikkimese origin. The Petitioner’s profession is acting in flims. The Petitioner’s original name is Tshering Pintso. The subject matter of the above Petitions are the Assessment Year 1997¬-98 to 2005¬-06. The Petitioner is seeking certain benefits which have been conferred on account of insertion of Section 10(26 AAA) by the Finance Act, 2008, which has been incorporated with retrospective effect from 1¬/4¬/1990. The Petitioner’s assessment was completed for the relevant years and an order under Section 143(1) of the said Act has already been passed accepting total income mentioned by the Petitioner for each of the said Assessment Years.
4 Since the Applications have been filed by the Petitioner under Section 264 of the said Act. In view of the introduction of Section 10 (26 AAA) in the said Act, it would be gainful to refer to the said provision:
“(26AAA) in case of an individual, being a Sikkimese, any income which accrues or arises to him¬¬¬
(a) from any source in the State of Sikkim; or
(b) by way of dividend or interest on securities;
Provided that nothing contained in this clause shall apply to a Sikkimese woman who, on or after the 1st day of April 2008, marries an individual who is not a Sikkimese.
Explanation ¬¬¬ For the purposes of this clause, “Sikkimese” shall mean
(i) an individual, whose name is recorded int he register maintained under the Sikkim Subject Rules, 1961 (hereinafter referred to as the “Register of Si[kkim Subjects”), immediately before the 26th day of April, 1975; or
(ii) an individual, whose name is included in the Register of Sikkim Subjects by virtue of the Government of India Order No.26030/36/90¬I.C.I., dated the 7th August, 1990 and order of even number dated the 8th April, 1991; or
(iii) any other individual, whose name does not appear in the Register of Sikkim Subjects, but it is established beyond doubt that the name of such individual’s father or husband or paternal grand¬father or brother from the same father has been recorded in that register;]
5 The said provision has been inserted with retrospective effect from 1¬/4/¬1990 by the Finance Act 2008, which received the assent of the President received on 10¬/5/¬2008. The said fact is relevant in the context of the issue, which arise for consideration in present Petitions. In terms of the saidprovision, the Petitioner being of Sikkimese origin claimed that the amounts that he has received as and by way of dividend and interest in each of the Assessment Years, would be exempt from tax by virtue of newly inserted provision. In so far as the above Writ Petition No.1549 of 2010 is concerned, the dividend amount is Rs.26,73,023/¬ and the interest is Rs.1250/¬ for the Assessment Year 2002¬2003. The said amounts vary in order of the above Petitions.
6 The Petitioner accordingly sought to claim benefit of the said provision and filed an Application under Section 264 of the said Act on 4/¬9¬/2008. To the said application, the Petitioner appended the certificate issued by the Land Revenue Department, Government of Sikkim stating that the Petitioner is a Sikkimese subject and registered under Sikkim Subject Register at Sr. No.741 as also certificate issued by the Sub Divisional Magistrate (Adm.), Gyalshing, West Sikkim, disclosing that the Petitioner owns landed property bearing holding No.5 plot no.91 admeasuring are 8860 hectare situated at Yuksam and that he is the Schedule Tribe belonging to Bhutia Community.
Similar applications were filed by the Petitioner up to the Assessment Year 2005¬2006. Since there was a delay in filing the Applications, the Petitioner filed another application for condonation of delay, in the said applications under Section 264. The reasons for the delay were also stated in the saidapplications for the consideration of the authority to which the said applications were made, namely theCommissioner of Income Tax who had powers under Section 264 of the said Act, for condonation of delay. The said Applications were considered by the Commissioner of Income Tax¬II and by the impugned orders all dated 4¬/3¬/2010, the Commissioner rejected the said Applications. The Commissioner has recorded the fact that the applications were filed pursuant to the introduction of Section 10(26 AAA) of the said Act,which has come into effect with retrospective operation from 1¬4¬1990 and, therefore, the assessee could apply for the said assessment year as also for the subsequent Assessment Years. Though the Commissioner accepted the fact of the introduction of Section 10(26 AAA) from 1/4-/1990, the Commissioner observed that he is unable to entertain the Petition beyond the time limit prescribed in the said Act. The relevant excerpt of the impugned order is reproduced hereunder.
“ Although the amendment has necessitated this petition, the undersigned is unable to entertain this petition beyond the time limits prescribed in the Act. Moreover, there is nothing on the record to show, that there is a mistake apparent from records with reference to the order sought to be revised, by the assessee.
7 We have heard the Learned Counsel for the Petitioner Shri Shivram and the Learned Counsel for the Respondents Shri D.K.Kamwal. The Learned Counsel for the Petitioner advanced submissions as to why the Petitioner is entitled for condonation of delay whereas the Learned Counsel forthe Respondents advanced submissions to the contrary. In the light of the submissions made by the Learned Counsel, it would be apposite to reproduce the relevant provisions of Section 264(6) of the said Act i.e. the provisions under which the Commissioner is vested with the powers to condone the delay. The same is reproduced hereunder:
“In the case of an application for revision under this section by the assessee, the application must be made within one year from the date on which the order in question was communicated to him or the date on which he otherwise came to know of it, whichever is earlier:
Provided that the Commissioner may, if he is satisfied that the assessee was prevented by sufficient cause from making the application within that period, admit an application made after the expiry of that period.
The reading of the said provision, therefore, discloses that if the Assessee was prevented by sufficient cause from making the application within the period prescribed and the Commissioner is satisfied with the reasons given by the Assessee for not filing the said application within the period prescribed, he may admit the application made after expiry of a period. Indubitably in the instant case, the Application under Section 264 came to be filed by the Petitioner on account of the introduction of Section 10(26AAA) which came into operation with retrospective effect from 1/¬4¬/1990. By the said provision the assessee, who is a Sikkimese by origin, was entitled to certain benefits, obviously there seem to be a rational in introducing the said provisions as may be the Government was of the view that the said benefit is required to begranted for the upliftment of the people of Sikkimese origin. There can be no dispute that the Finance Act by which the said provision was introduced, received the assent of the President on 10¬/5¬/2008. The Petitioner has made an application immediately after a period of four months of the said Finance Act,receiving assent of the President. The reasons as to why the Petitioner did file the applications at the said point of time, have been mentioned by the Petitioner in the applications for each of the Assessment Years. However, as can be seen from the impugned order, the Commissioner has not even adverted to the reasons mentioned by the Petitioner in the application of condonation of delay and has in a cryptic manner rejected the said Application by observing that he is unable to entertain the Petitioner beyond the time limit prescribed. Once the Commissioner is vested with the power of Condonation of delay, then it is incumbent upon the Commissioner to take into consideration the reasons mentioned by the Assessee seeking condonation of delay. A reading of the impugned order, however, does not indicate that the reasons mentioned by the Petitioner have been considered. In fact, the said reasons have not even been adverted to by the Commissioner. In matters of this kind, wherein a benefit is sought to be given to an assessee that too with retrospective effect, a highly technical and pedantic approach is required to be eschewed and approach which furthers the intent and purport of the legislation is required to be adopted.
8 Though in the normal circumstances, for the reasons mentioned herein above, we would have set aside the orders and remanded the matter back to the Commissioner for a denovo consideration, however, for the reasons which we have mentioned herein above, we do not deem it appropriate to do so and, therefore, allow these Petitions by making the Rule absolute in terms of prayer clauses (a) and (b).
(R.M.SAVANT,J.) (V.C.DAGA,J.)
CIT Vs west Bengal infrastructure Devel corp, SC
Courts not to dismiss petitions of revenue authorities only due to delay, without going into Merits of case.
CONDONE DELAY Danny Denzongpa
In matters giving benefit to assessee, dept must avoid Technical Approach - HC relief for actor Danny Denzongpa
Court : Bombay High Court
Brief : The Bombay High Court has directed the income tax commissioner to reconsider the applications of Bollywood actor Danny Denzongpa alias Tshering Pintso for tax exemptions on dividends and interests since 1997-98 under section 10(26AAA) as incorporated in the Finance Act, which entitled tax exemptions to Sikkimese nationals on dividends and interest on securities. A division bench of the high court has set aside the order passed by the income-tax commissioner rejecting nine applications filed by Denzongpa seeking the exemptions as per the amendment to the Finance Act in 2008.
Citation : Danny Denzongpa (Alias Tshering Pintso) Versus Commissioner of Income Tax & Others
Judgement :
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
• Danny Denzongpa Alias Tshering Pintso) VERSUSCommissioner of Income Tax
• WRIT PETITION NO.1549 OF 2010, 1550 OF 2010, 1552 OF 2010, 1554 OF 2010, 1555 OF 2010, 1561 OF 2010, 1641 OF 2010, 1658 OF 2010
• DATE: ¬ 20thSeptember, 2010
• JUDGMENT (PER SHRI R.M.SAVANT)
1 Rule. With the consent of the parties made returnable forthwith and heard.
2 The above Writ Petition and the companion writ Petitions challenge the orders all dated 04/03/2010 rejecting the applications filed by the Petitioner under Section 264 of the Income Tax Act, 1962 (brevities sake referred to as the said Act) in respect of the Assessment years covered by each of the petitions. Since the orders passed under Section 264 of the said Act are identical and since the Petitions involving a common question, they are all heard together and disposed of.
3 The facts as disclosed above in each of the Petitions are as under:
The Petitioner is an Indian National of Sikkimese origin. The Petitioner’s profession is acting in flims. The Petitioner’s original name is Tshering Pintso. The subject matter of the above Petitions are the Assessment Year 1997¬-98 to 2005¬-06. The Petitioner is seeking certain benefits which have been conferred on account of insertion of Section 10(26 AAA) by the Finance Act, 2008, which has been incorporated with retrospective effect from 1¬/4¬/1990. The Petitioner’s assessment was completed for the relevant years and an order under Section 143(1) of the said Act has already been passed accepting total income mentioned by the Petitioner for each of the said Assessment Years.
4 Since the Applications have been filed by the Petitioner under Section 264 of the said Act. In view of the introduction of Section 10 (26 AAA) in the said Act, it would be gainful to refer to the said provision:
“(26AAA) in case of an individual, being a Sikkimese, any income which accrues or arises to him¬¬¬
(a) from any source in the State of Sikkim; or
(b) by way of dividend or interest on securities;
Provided that nothing contained in this clause shall apply to a Sikkimese woman who, on or after the 1st day of April 2008, marries an individual who is not a Sikkimese.
Explanation ¬¬¬ For the purposes of this clause, “Sikkimese” shall mean
(i) an individual, whose name is recorded int he register maintained under the Sikkim Subject Rules, 1961 (hereinafter referred to as the “Register of Si[kkim Subjects”), immediately before the 26th day of April, 1975; or
(ii) an individual, whose name is included in the Register of Sikkim Subjects by virtue of the Government of India Order No.26030/36/90¬I.C.I., dated the 7th August, 1990 and order of even number dated the 8th April, 1991; or
(iii) any other individual, whose name does not appear in the Register of Sikkim Subjects, but it is established beyond doubt that the name of such individual’s father or husband or paternal grand¬father or brother from the same father has been recorded in that register;]
5 The said provision has been inserted with retrospective effect from 1¬/4/¬1990 by the Finance Act 2008, which received the assent of the President received on 10¬/5/¬2008. The said fact is relevant in the context of the issue, which arise for consideration in present Petitions. In terms of the saidprovision, the Petitioner being of Sikkimese origin claimed that the amounts that he has received as and by way of dividend and interest in each of the Assessment Years, would be exempt from tax by virtue of newly inserted provision. In so far as the above Writ Petition No.1549 of 2010 is concerned, the dividend amount is Rs.26,73,023/¬ and the interest is Rs.1250/¬ for the Assessment Year 2002¬2003. The said amounts vary in order of the above Petitions.
6 The Petitioner accordingly sought to claim benefit of the said provision and filed an Application under Section 264 of the said Act on 4/¬9¬/2008. To the said application, the Petitioner appended the certificate issued by the Land Revenue Department, Government of Sikkim stating that the Petitioner is a Sikkimese subject and registered under Sikkim Subject Register at Sr. No.741 as also certificate issued by the Sub Divisional Magistrate (Adm.), Gyalshing, West Sikkim, disclosing that the Petitioner owns landed property bearing holding No.5 plot no.91 admeasuring are 8860 hectare situated at Yuksam and that he is the Schedule Tribe belonging to Bhutia Community.
Similar applications were filed by the Petitioner up to the Assessment Year 2005¬2006. Since there was a delay in filing the Applications, the Petitioner filed another application for condonation of delay, in the said applications under Section 264. The reasons for the delay were also stated in the saidapplications for the consideration of the authority to which the said applications were made, namely theCommissioner of Income Tax who had powers under Section 264 of the said Act, for condonation of delay. The said Applications were considered by the Commissioner of Income Tax¬II and by the impugned orders all dated 4¬/3¬/2010, the Commissioner rejected the said Applications. The Commissioner has recorded the fact that the applications were filed pursuant to the introduction of Section 10(26 AAA) of the said Act,which has come into effect with retrospective operation from 1¬4¬1990 and, therefore, the assessee could apply for the said assessment year as also for the subsequent Assessment Years. Though the Commissioner accepted the fact of the introduction of Section 10(26 AAA) from 1/4-/1990, the Commissioner observed that he is unable to entertain the Petition beyond the time limit prescribed in the said Act. The relevant excerpt of the impugned order is reproduced hereunder.
“ Although the amendment has necessitated this petition, the undersigned is unable to entertain this petition beyond the time limits prescribed in the Act. Moreover, there is nothing on the record to show, that there is a mistake apparent from records with reference to the order sought to be revised, by the assessee.
7 We have heard the Learned Counsel for the Petitioner Shri Shivram and the Learned Counsel for the Respondents Shri D.K.Kamwal. The Learned Counsel for the Petitioner advanced submissions as to why the Petitioner is entitled for condonation of delay whereas the Learned Counsel forthe Respondents advanced submissions to the contrary. In the light of the submissions made by the Learned Counsel, it would be apposite to reproduce the relevant provisions of Section 264(6) of the said Act i.e. the provisions under which the Commissioner is vested with the powers to condone the delay. The same is reproduced hereunder:
“In the case of an application for revision under this section by the assessee, the application must be made within one year from the date on which the order in question was communicated to him or the date on which he otherwise came to know of it, whichever is earlier:
Provided that the Commissioner may, if he is satisfied that the assessee was prevented by sufficient cause from making the application within that period, admit an application made after the expiry of that period.
The reading of the said provision, therefore, discloses that if the Assessee was prevented by sufficient cause from making the application within the period prescribed and the Commissioner is satisfied with the reasons given by the Assessee for not filing the said application within the period prescribed, he may admit the application made after expiry of a period. Indubitably in the instant case, the Application under Section 264 came to be filed by the Petitioner on account of the introduction of Section 10(26AAA) which came into operation with retrospective effect from 1/¬4¬/1990. By the said provision the assessee, who is a Sikkimese by origin, was entitled to certain benefits, obviously there seem to be a rational in introducing the said provisions as may be the Government was of the view that the said benefit is required to begranted for the upliftment of the people of Sikkimese origin. There can be no dispute that the Finance Act by which the said provision was introduced, received the assent of the President on 10¬/5¬/2008. The Petitioner has made an application immediately after a period of four months of the said Finance Act,receiving assent of the President. The reasons as to why the Petitioner did file the applications at the said point of time, have been mentioned by the Petitioner in the applications for each of the Assessment Years. However, as can be seen from the impugned order, the Commissioner has not even adverted to the reasons mentioned by the Petitioner in the application of condonation of delay and has in a cryptic manner rejected the said Application by observing that he is unable to entertain the Petitioner beyond the time limit prescribed. Once the Commissioner is vested with the power of Condonation of delay, then it is incumbent upon the Commissioner to take into consideration the reasons mentioned by the Assessee seeking condonation of delay. A reading of the impugned order, however, does not indicate that the reasons mentioned by the Petitioner have been considered. In fact, the said reasons have not even been adverted to by the Commissioner. In matters of this kind, wherein a benefit is sought to be given to an assessee that too with retrospective effect, a highly technical and pedantic approach is required to be eschewed and approach which furthers the intent and purport of the legislation is required to be adopted.
8 Though in the normal circumstances, for the reasons mentioned herein above, we would have set aside the orders and remanded the matter back to the Commissioner for a denovo consideration, however, for the reasons which we have mentioned herein above, we do not deem it appropriate to do so and, therefore, allow these Petitions by making the Rule absolute in terms of prayer clauses (a) and (b).
(R.M.SAVANT,J.) (V.C.DAGA,J.)
CBDT vide circular no 7 2010 dated 27/10/2010
CBDT vide circular no 7 2010 dated 27/10/2010
Sir
Recently CBDT has given a clarification that registration under 80G(5)after 01-10-2009 are valid until withdrawn by it department it means renewals are not necessory
copy of notification is as under
CBDT Clarification on approvals u/s 10(23C) and 80G(5)
No.402/92/2006-MC (47 of 2010)
Government of India / Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
***
New Delhi dated the 3rd October 2010
The Central Board of Direct Taxes (CBDT) has clarified vide Circular No.7/2010 that the approvals under sub-clause (vi) and (via) of section 10(23C) granted on or after 1.12.2006 shall be valid until withdrawn.
The CBDT has further clarified that the approvals under clause (vi) of subsection (5) of section 80G granted on or after 1.10.2009 shall be valid until withdrawn.
These approvals will be one-time approvals unless withdrawn by the income-tax authority empowered to grant them.
seniors can correct me if i am wrong
CBDT CLARIFICATION REGARDING PERIOD OF VALIDITY OF APPROVAL U/S 10(23C) AND SECTION 80G OF THE INCOME TAX ACT. {194 TAXMAN (ST.) 17}
The CBDT vide circular no. 7/2010 dated 27/10/2010 regarding the validity of approvals granted by the Chief Commissioner of Income Tax u/s 10(23C) (iv), (v) (vi) and (via) and by the Commissioner of Income Tax or Directors of Income Tax u/s 80G(5) of the Income Tax Act.
The clarification is issued in view of the fact that the different field authorities are interpreting the provisions relating to period of validity of the above approvals in a different manner.
The CBDT clarifies the intention behind the amendment to section 10(23C) (iv) and (v) by taxation laws (Amendment Act, 2006) and the insertion of the proviso to the clause.
The CBDT, clarifies that the intension of the legislature is sufficiently clear that the approval u/s 10(23C) (iv) and (v) after the cut-off date mentioned in the amendment would be one time approval which would be valid until withdrawn.
CBDT also clarifies that the approval u/s 10(23C) (vi) and (via) are governed by the procedure contain in rule 2CA. The rule 2CA amended w.e.f. 1/12/2006 by substituting the existing sub-rule 3 by a new proviso. It is therefore, clarifies that any approval issued on or after 1/12/2006 under sub clause (vi) or (via) of section 10(23C) would be one time approval which would be valid till it is withdrawn.
The CBDT also clarifies, for removal of doubt, that any approval u/s 80G(5) on or after 01/10/2009 would be one time approval which will valid till it is withdrawn. The circular also clarifies the intention behind deletion of proviso to section 80G (5)(vi) by Finance (No.2) Bill, 2009
CIRCULAR
INCOME-TAX ACT
Section 10(23C)(iv) of the Income-tax Act, 1961 - Exemptions - Charitable or religious trusts/institutions - Clarification regarding period of validity of approvals issued under section 10(23C)(iv), (v), (vi) or (via) and section 80G(5) of the Income-tax Act
CIRCULAR NO. 7/2010 [F. NO. 197/21/2010-ITA-I], DATED 27-10-2010
The Board has received various references from the field formations as well as members of public about the period of validity of approvals granted by the Chief Commissioners of Income-tax or Directors General of Income-tax under sub-clauses (iv), (v), (vi) and (via) of section 10(23C) and by the Commissioners of Income-tax or Directors of Income-tax under section 80G(5) of the Income-tax Act, 1961.
2. It has also been noticed by the Board that different field authorities are interpreting the provisions relating to the period of validity of the above approvals in a different manner. The following instructions are accordingly issued for the removal of doubts about the period of validity of various approvals referred to above.
3. Sub-clauses (iv) and (v) of section 10(23C) were amended by Taxation Laws (Amendment) Act, 2006 by insertion of the following proviso to that clause :—
“Provided also that any (notification issued by the Central Government under sub-clause (iv) or sub-clause (v), before the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President, shall at any one time, have effect for such assessment year or years, not exceeding three assessment years) (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the notification.”
The intention behind the insertion of the above proviso was laid out in the relevant portion of the explanatory notes to the Taxation Laws Amendment Act, 2006 which reads as under :
“A need has been felt to dispense with the requirement of periodic renewal of notifications. The requirement of periodic renewal of notifications has been resulting in delays in their renewal.
5.2 In order to overcome delays, the eighth proviso to section 10(23C) has been amended so as to provide that the above mentioned limit of effectivity for three assessment years shall be applicable in respect of notifications issued by the Central Government under sub-clause (iv) or sub-clause (v) before the date on which Taxation Laws (Amendment) Bill, 2006 receives the assent of the President.
5.3 The Taxation Laws (Amendment) Bill, 2006 received the assent of the President on 13-7-2006. Therefore, on account of the above amendment any notification issued by the Central Government under the said sub-clause (iv) or sub-clause (v), on or after 13-7-2006 will be valid until withdrawn and there will be no requirement on the part of the assessee to seek renewal of the same after three years.”
The intention of legislature that the approvals under section 10(23C)(iv) and (v) after the cut off date mentioned above would be a one time approval which would be valid until withdrawn, is thus sufficiently clear.
4. Approvals under sub-clauses (vi) and (via) of section 10(23C) are governed by the procedure contained in rule 2CA. Rule 2CA was amended with effect from 1-12-2006, inter alia by substitution of the existing sub-rule 3 by a new provision which is reproduced below :—
“(3) The approval of the Central Board of Direct Taxes or Chief Commissioner or Director General, as the case may be, granted before the 1st day of December, 2006 shall at any one time have effect for a period not exceeding three assessment years.”
Read in isolation, without any further guidance as was given by way of explanatory notes to Finance Act, 2006 in respect of amendment of sub-clauses (iv) and (v) of section 10(23C), the above amendment leaves some scope for doubt about the period of validity of the approval under section 10(23C)(vi) and (via) on or after 1-12-2006. For the removal of doubts if any in this regard, it is clarified that as in the case of approvals under sub-clauses (iv) and (v) of section 10(23C), any approval issued on or after 1-12-2006 under sub-clause (vi) or (via) of that sub-section would also be a one time approval which would be valid till it is withdrawn.
5. As regards approvals granted upto 1-10-2009 under section 80G by the Commissioners of Income-tax/Directors of Income-tax, proviso to section 80G(5)(vi) clarified that any approval shall have effect for such assessment year or years not exceeding five assessment years as may be specified in the approval. The above proviso was deleted by the Finance (No. 2) Act, 2009. The intent behind the deletion of above proviso as explained in the explanatory memorandum to Finance (No. 2) Bill, 2009 was as under :
“Further as per clause (vi) of sub-section (5) of section 80G of the Income-tax Act, 1961, the institutions or funds to which the donations are made have to be approved by the Commissioner of Income-tax in accordance with the rules prescribed in rule 11AA of the Income-tax Rules, 1962. The proviso to this clause provides that any approval granted under this clause shall have effect for such assessment year or years, not exceeding five assessment years, as may be specified in the approval.
Due to this limitation imposed on the validity of such approvals, the approved institutions or funds have to bear the hardship of getting their approvals renewed from time to time. This is unduly burdensome for the bona fide institutions or funds and also leads to wastage of time and resources of the tax administration in renewing such approvals in a routine manner.
Therefore, it is proposed to omit the proviso to clause (vi) of sub-section (5) of section 80G to provide that the approval once granted shall continue to be valid in perpetuity. Further, the Commissioner will also have the power of withdraw the approval if the Commissioner is satisfied that the activities of such institution or fund are not genuine or are not being carried out in accordance with the objects of the institution or fund. This amendment will take effect from 1st day of October, 2009. Accordingly, existing approvals expiring on or after 1st October, 2009 shall be deemed to have been extended in perpetuity unless specifically withdrawn.”
It appears that some doubts still prevail about the period of validity of approval under section 80G subsequent to 1-10-2009, especially in view of the fact that no corresponding change has been made in Rule 11A(4). To remove any doubts in this regard, it is reiterated that any approval under section 80G(5) on or after 1-10-2009 would be a one time approval which would be valid till it is withdrawn.
Significant Circulars/ notification issued by the Central Board of Direct Taxes during
the period 15.10.2010 to 15.11.2010
I. Circulars
1. Circular No. 7/2010 dated 27-10-2010
Clarification regarding period of validity of approvals issued under section
10(23C)(iv), (v), (vi) or (via) and section 80G(5) of the Income-tax Act
For the removal of doubts about the period of validity of various approvals granted by the
Chief Commissioners of Income-tax or Directors General of Income-tax under subclauses (iv), (v), (vi) and (via) of section 10(23C) and by the Commissioners of Incometax or Directors of Income-tax under section 80G(5) of the Income-tax Act, 1961, the
Central Board of Direct Taxes has, through, this circular clarified the following:-
1. In light of the amendment brought by Taxation Laws (Amendment) Act,2006, it
has been clarified that for the purposes of sub-clauses (iv) and (v) of section
10(23C) any notification issued by the Central Government under the said
clauses, on or after 13-7-2006 will be valid until withdrawn and there will be no
requirement on the part of the assessee to seek renewal of the same after three
years.
2. In light of the provisions of Rule 2CA, it has been clarified that for the purposes
of sub-clauses (vi) and (via) of section 10(23C) any approval issued on or after 1-
12-2006 would be a one time approval and would be valid till it is withdrawn.
3. In light of the amendment brought by Finance (No.2)Act,2009 it has been
clarified that for the purposes of section 80G(5), existing approvals expiring on or
after 1st October, 2009 shall be deemed to have been extended in perpetuity
unless specifically withdrawn. Further, any approval under section 80G(5) on or
after 1-10-2009 would be a one time approval which would be valid till it is
withdrawn.
The complete text of the said circular can be downloaded from the link below:
http://law.incometaxindia.gov.in/DIT/File_opener.aspx?page=CIR&schT=&csId=fe5fcd
86-905e-4a1e-818e-78bc063c05f4&sch=&title=Taxmann - Direct Tax Laws
Sir
Recently CBDT has given a clarification that registration under 80G(5)after 01-10-2009 are valid until withdrawn by it department it means renewals are not necessory
copy of notification is as under
CBDT Clarification on approvals u/s 10(23C) and 80G(5)
No.402/92/2006-MC (47 of 2010)
Government of India / Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
***
New Delhi dated the 3rd October 2010
The Central Board of Direct Taxes (CBDT) has clarified vide Circular No.7/2010 that the approvals under sub-clause (vi) and (via) of section 10(23C) granted on or after 1.12.2006 shall be valid until withdrawn.
The CBDT has further clarified that the approvals under clause (vi) of subsection (5) of section 80G granted on or after 1.10.2009 shall be valid until withdrawn.
These approvals will be one-time approvals unless withdrawn by the income-tax authority empowered to grant them.
seniors can correct me if i am wrong
CBDT CLARIFICATION REGARDING PERIOD OF VALIDITY OF APPROVAL U/S 10(23C) AND SECTION 80G OF THE INCOME TAX ACT. {194 TAXMAN (ST.) 17}
The CBDT vide circular no. 7/2010 dated 27/10/2010 regarding the validity of approvals granted by the Chief Commissioner of Income Tax u/s 10(23C) (iv), (v) (vi) and (via) and by the Commissioner of Income Tax or Directors of Income Tax u/s 80G(5) of the Income Tax Act.
The clarification is issued in view of the fact that the different field authorities are interpreting the provisions relating to period of validity of the above approvals in a different manner.
The CBDT clarifies the intention behind the amendment to section 10(23C) (iv) and (v) by taxation laws (Amendment Act, 2006) and the insertion of the proviso to the clause.
The CBDT, clarifies that the intension of the legislature is sufficiently clear that the approval u/s 10(23C) (iv) and (v) after the cut-off date mentioned in the amendment would be one time approval which would be valid until withdrawn.
CBDT also clarifies that the approval u/s 10(23C) (vi) and (via) are governed by the procedure contain in rule 2CA. The rule 2CA amended w.e.f. 1/12/2006 by substituting the existing sub-rule 3 by a new proviso. It is therefore, clarifies that any approval issued on or after 1/12/2006 under sub clause (vi) or (via) of section 10(23C) would be one time approval which would be valid till it is withdrawn.
The CBDT also clarifies, for removal of doubt, that any approval u/s 80G(5) on or after 01/10/2009 would be one time approval which will valid till it is withdrawn. The circular also clarifies the intention behind deletion of proviso to section 80G (5)(vi) by Finance (No.2) Bill, 2009
CIRCULAR
INCOME-TAX ACT
Section 10(23C)(iv) of the Income-tax Act, 1961 - Exemptions - Charitable or religious trusts/institutions - Clarification regarding period of validity of approvals issued under section 10(23C)(iv), (v), (vi) or (via) and section 80G(5) of the Income-tax Act
CIRCULAR NO. 7/2010 [F. NO. 197/21/2010-ITA-I], DATED 27-10-2010
The Board has received various references from the field formations as well as members of public about the period of validity of approvals granted by the Chief Commissioners of Income-tax or Directors General of Income-tax under sub-clauses (iv), (v), (vi) and (via) of section 10(23C) and by the Commissioners of Income-tax or Directors of Income-tax under section 80G(5) of the Income-tax Act, 1961.
2. It has also been noticed by the Board that different field authorities are interpreting the provisions relating to the period of validity of the above approvals in a different manner. The following instructions are accordingly issued for the removal of doubts about the period of validity of various approvals referred to above.
3. Sub-clauses (iv) and (v) of section 10(23C) were amended by Taxation Laws (Amendment) Act, 2006 by insertion of the following proviso to that clause :—
“Provided also that any (notification issued by the Central Government under sub-clause (iv) or sub-clause (v), before the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President, shall at any one time, have effect for such assessment year or years, not exceeding three assessment years) (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the notification.”
The intention behind the insertion of the above proviso was laid out in the relevant portion of the explanatory notes to the Taxation Laws Amendment Act, 2006 which reads as under :
“A need has been felt to dispense with the requirement of periodic renewal of notifications. The requirement of periodic renewal of notifications has been resulting in delays in their renewal.
5.2 In order to overcome delays, the eighth proviso to section 10(23C) has been amended so as to provide that the above mentioned limit of effectivity for three assessment years shall be applicable in respect of notifications issued by the Central Government under sub-clause (iv) or sub-clause (v) before the date on which Taxation Laws (Amendment) Bill, 2006 receives the assent of the President.
5.3 The Taxation Laws (Amendment) Bill, 2006 received the assent of the President on 13-7-2006. Therefore, on account of the above amendment any notification issued by the Central Government under the said sub-clause (iv) or sub-clause (v), on or after 13-7-2006 will be valid until withdrawn and there will be no requirement on the part of the assessee to seek renewal of the same after three years.”
The intention of legislature that the approvals under section 10(23C)(iv) and (v) after the cut off date mentioned above would be a one time approval which would be valid until withdrawn, is thus sufficiently clear.
4. Approvals under sub-clauses (vi) and (via) of section 10(23C) are governed by the procedure contained in rule 2CA. Rule 2CA was amended with effect from 1-12-2006, inter alia by substitution of the existing sub-rule 3 by a new provision which is reproduced below :—
“(3) The approval of the Central Board of Direct Taxes or Chief Commissioner or Director General, as the case may be, granted before the 1st day of December, 2006 shall at any one time have effect for a period not exceeding three assessment years.”
Read in isolation, without any further guidance as was given by way of explanatory notes to Finance Act, 2006 in respect of amendment of sub-clauses (iv) and (v) of section 10(23C), the above amendment leaves some scope for doubt about the period of validity of the approval under section 10(23C)(vi) and (via) on or after 1-12-2006. For the removal of doubts if any in this regard, it is clarified that as in the case of approvals under sub-clauses (iv) and (v) of section 10(23C), any approval issued on or after 1-12-2006 under sub-clause (vi) or (via) of that sub-section would also be a one time approval which would be valid till it is withdrawn.
5. As regards approvals granted upto 1-10-2009 under section 80G by the Commissioners of Income-tax/Directors of Income-tax, proviso to section 80G(5)(vi) clarified that any approval shall have effect for such assessment year or years not exceeding five assessment years as may be specified in the approval. The above proviso was deleted by the Finance (No. 2) Act, 2009. The intent behind the deletion of above proviso as explained in the explanatory memorandum to Finance (No. 2) Bill, 2009 was as under :
“Further as per clause (vi) of sub-section (5) of section 80G of the Income-tax Act, 1961, the institutions or funds to which the donations are made have to be approved by the Commissioner of Income-tax in accordance with the rules prescribed in rule 11AA of the Income-tax Rules, 1962. The proviso to this clause provides that any approval granted under this clause shall have effect for such assessment year or years, not exceeding five assessment years, as may be specified in the approval.
Due to this limitation imposed on the validity of such approvals, the approved institutions or funds have to bear the hardship of getting their approvals renewed from time to time. This is unduly burdensome for the bona fide institutions or funds and also leads to wastage of time and resources of the tax administration in renewing such approvals in a routine manner.
Therefore, it is proposed to omit the proviso to clause (vi) of sub-section (5) of section 80G to provide that the approval once granted shall continue to be valid in perpetuity. Further, the Commissioner will also have the power of withdraw the approval if the Commissioner is satisfied that the activities of such institution or fund are not genuine or are not being carried out in accordance with the objects of the institution or fund. This amendment will take effect from 1st day of October, 2009. Accordingly, existing approvals expiring on or after 1st October, 2009 shall be deemed to have been extended in perpetuity unless specifically withdrawn.”
It appears that some doubts still prevail about the period of validity of approval under section 80G subsequent to 1-10-2009, especially in view of the fact that no corresponding change has been made in Rule 11A(4). To remove any doubts in this regard, it is reiterated that any approval under section 80G(5) on or after 1-10-2009 would be a one time approval which would be valid till it is withdrawn.
Significant Circulars/ notification issued by the Central Board of Direct Taxes during
the period 15.10.2010 to 15.11.2010
I. Circulars
1. Circular No. 7/2010 dated 27-10-2010
Clarification regarding period of validity of approvals issued under section
10(23C)(iv), (v), (vi) or (via) and section 80G(5) of the Income-tax Act
For the removal of doubts about the period of validity of various approvals granted by the
Chief Commissioners of Income-tax or Directors General of Income-tax under subclauses (iv), (v), (vi) and (via) of section 10(23C) and by the Commissioners of Incometax or Directors of Income-tax under section 80G(5) of the Income-tax Act, 1961, the
Central Board of Direct Taxes has, through, this circular clarified the following:-
1. In light of the amendment brought by Taxation Laws (Amendment) Act,2006, it
has been clarified that for the purposes of sub-clauses (iv) and (v) of section
10(23C) any notification issued by the Central Government under the said
clauses, on or after 13-7-2006 will be valid until withdrawn and there will be no
requirement on the part of the assessee to seek renewal of the same after three
years.
2. In light of the provisions of Rule 2CA, it has been clarified that for the purposes
of sub-clauses (vi) and (via) of section 10(23C) any approval issued on or after 1-
12-2006 would be a one time approval and would be valid till it is withdrawn.
3. In light of the amendment brought by Finance (No.2)Act,2009 it has been
clarified that for the purposes of section 80G(5), existing approvals expiring on or
after 1st October, 2009 shall be deemed to have been extended in perpetuity
unless specifically withdrawn. Further, any approval under section 80G(5) on or
after 1-10-2009 would be a one time approval which would be valid till it is
withdrawn.
The complete text of the said circular can be downloaded from the link below:
http://law.incometaxindia.gov.in/DIT/File_opener.aspx?page=CIR&schT=&csId=fe5fcd
86-905e-4a1e-818e-78bc063c05f4&sch=&title=Taxmann - Direct Tax Laws
Stay Applications
Stay Applications
1. Sections 220 to 232 of the Income-tax Act deals with collection and recovery of taxes. These provisions will become active every year in the months of February and March. Probably each officer or Commissioner may have to report to the higher authority the taxes outstanding, and total collection of taxes in their charge. As the scope of this Article is very limited. I will not deal with various controversial issues of Recovery Proceedings and will restrict only to few provisions which are useful in our day-to-day practice.
2. Recovery proceedings under the Act can be started against a person only when he is in default or deemed to be in default in making payment of taxes. The assessee who is in default or is deemed to be in default in making payment of taxes may make an application, requesting the Assessing Officer not to treat him as the assessee in default in respect of the amount in dispute in the appeal preferred by the assessee. The Assessing Officer may in his discretion and with or without imposing any conditions pass an order, not treating the assessee as an assessee in default in respect of such disputed amount till the appeal is pending.
3. It may be noted that mere filing of an appeal does not suo motu stay the proceedings of recovery of the tax in demand. Therefore, it is necessary that as soon as an order raising the demand is received, assessee must make an application to stay and keep the demand in abeyance.
4. While filing Stay application before the Assessing Officer, the assessee will have to give the brief facts as under:
1. The assessment history of the assessee,
2. His conduct and co-operation with the department,
3. Points raised in the appeal,
4. The chances of recovery in case the appeal is dismissed and
5. The hardship that would be caused to the assessee by persistent demand of the tax by the department.
5. If an assessee's application u/s. 220(6) is not replied by the Assessing Officer, even though the same was filed in time, the assessee can always contend before the Tax Recovery Officer that before taking any action against the assessee, his application for stay of demand should be disposed of. The Tax Recovery Officer can also consider the assessee's applications u/s. 225(1) and grant time for the payment of any tax till the disposal of the assessee's appeal by the First Appellate Authority.
6. In the event of Assessing Officer rejecting assessee's application u/s. 220(6) of the Income-tax Act, the assessee can prefer an application to the Commissioner of Income-tax under whose jurisdiction assessee's case falls for staying the demand of tax in dispute till the hearing and final disposal of the assessee's appeal by the Commissioner of Income-tax (Appeals).
7. If the Commissioner fails to discharge his duty, the assessee may file a Writ Petition under Article 226 of the Constitution of India. However, when an appeal is pending before the Income Tax Appellate Tribunal, the assessee can file a Stay Petition before the Income Tax Appellate Tribunal to stay the recovery proceedings.
8. The Central Board of Direct taxes in its circular No.530 dated 6-3-1989 [176 ITR St. (240) and Circular No. 589 dated 16-1-1991, 187 ITR St. (79)] has laid down the guidelines for the Assessing Officer to exercise his jurisdiction u/s. 220(6) of the Act where an assessee has preferred an appeal.
9. The discretionary power conferred by section 220 (6) upon the Assessing Officer is coupled with a duty and if he does not exercise it when the occasion calls for it or if he exercise it in such a manner that it is no exercise of discretion at all, he can be compelled to discharge his duty by an order of the court.
[Ladhuram Taparia vs. B. K. Bagchi, 20 ITR 51, (Cal.) Shivangi Steels P. Ltd. vs ACIT, 226 ITR 62, 63 (All)]
10. Protective recovery of tax is not permissible even though protective assessment can be validly made. [Sunil Kumar vs. CIT, 139 ITR 880 (Bom.)]
11. Representative assessee
Where an assessee dies before the issue of the certificate, unless his legal representatives are served with a notice of demand under section 156 and they fail to comply with that notice within 30 days from the date of receipt of the notice, they cannot be said to be "assessee in default" and consequently no recovery proceedings can be taken against them. [Satya Pal Verma vs. ITO, 106 ITR 540 (All) : Bai Chandanben Jivanlal vs. I. D. Joshi, Collector, 74 ITR 448, (Guj)]
A recovery certificate issued or drawn up by Tax Recovery Officer against a person who is already dead, is a nullity. The certificate must be against a defaulter who is alive. [Isha Beevi vs. TRO, 80 ITR 82, (Ker) on appeal 101 ITR 449, (SC)]. If an assessee in default dies before the issue of a certificate in his name, proceedings under Section 159 of the Act are necessary to bring on record the name or names of the legal representative or representatives.
12. Filing of claims
If any part of the property of an applicant is illegally or unjustifiably attached, an objection under rule 11(1) of the second Schedule to the Act may be filed by him before the Tax Recovery Officer who has got the jurisdiction to adjudicate upon it.
Rule 58(a) of the Order XXI of C.P.C. provides that the claim should be preferred before the property so attached is sold.
Where a claim or objection is made under rule 11 against attachment of a property in execution of a recovery certificate, it is the bounden duty of the Tax Recovery Officer to first dispose of the objection and then to proceed further. Investigation of a claim properly filed is essential. Even if the property to which the claim or objection applies has been advertised for sale, the Tax Recovery Officer ordering the sale may postpone it, pending such investigation.
Where a claim or an objection preferred under rule 11(1) of the Second Schedule is rejected or dismissed, the party against whom an order rejecting or dismissing the claim or objection is made may institute a suit, under rule 11(6), in a Civil Court to establish the right which he claims to the property. In Sawai Singhai vs. Union of India (AIR) 1966 SC 1968), the Supreme Court observed that the suit brought under Order 21, rule 63 (corresponding to rule 11 (6) of the Second Schedule), concerns not only with the question of possession but also with the question of title.
13. The Hon'ble A. P. High Court in ITO vs. Khalid Mehdi Khan (minor) 110 ITR 79, has taken the view that the Tribunal can not only stay the recovery proceedings but can also stay the proceedings before the Assessing Officer. Therefore, in a case where order under section 263 is passed and if the appeal is pending before Tribunal and in the meantime, if the Assessing Officer starts the assessment proceedings then in such circumstances, the assessee can file stay petition before the Tribunal and the Tribunal can stay the proceedings before the Assessing Officer. Please also see Ritz Hdrs Vyas, 185 ITR 311 (Bom).
14. The Hon'ble Supreme Court in CIT vs. Bansi Dhar & Sons 157 ITR 665 has taken the view that the Tribunal can also stay the proceedings when the reference is pending before the High Court. Therefore, in cases where the assessee has lost before the Tribunal and the reference is pending before the High Court and if the assessee is in a position to establish that he is not in a position to make the payment of tax in dispute, in such circumstances, the Tribunal can stay the proceedings till the disposal of the reference by the High Court.
15. It may be noted here that, before filing the stay petition, it is necessary that the assessee should approach the Commissioner to stay the recovery proceedings. When Commissioner refuses to stay the recovery proceedings, then only the Tribunal will exercise its power. In case the Commissioner grants instalment facility but the assessee shows his inability to make payment in instalment and the Commissioner rejects the stay application then the power of Tribunal can be invoked for stay. It may be further noted that the assessee must also show that he has no liquidity to pay the tax in dispute and if stay is not granted, great hardship will be caused to the assessee.
16. The Finance (No.2) Act, 1998 with effect from 1-10-1998 inserted sub-section (7) in section 253 prescribing for the first time a fee of five hundred rupees whenever an application for stay of demand has to be filed before the Appellate Tribunal.
17. The Finance Act, 2001 inserted two new proviso to sub-section (2A) of section 254 with effect from 1-6-2001. As per the first proviso, where an order of stay is made in any proceedings relating to an appeal filed under section 253(1), the Tribunal shall dispose of the appeal within a period of one hundred and eighty days from the date of such stay order.
As per the second proviso if such appeal is not so disposed of within the period specified in first proviso, the stay order shall stand vacated after the expiry of the said period.
In view of the specific language of the aforesaid second proviso, it is not only desirable but imperative on the part of the assessee to file an application for extension of the stay or granting of fresh stay, well in time before the expiry of the impugned six months period.
18. Rule 35A of the Income Tax Appellate Tribunal Rules, prescribes the procedure for filing the Stay Petition. As per this rule, any assessee filing an appeal under taxation Laws, before the Income Tax Appellate Tribunal may prefer stay application in the following manner.
1.
a. Every application for stay of recovery of demand of tax, interest, penalty, fine, Estate Duty or any other sum shall be presented in Triplicate by the applicant in person, or by his duly authorised agent, or sent by Registered Post to the Registrar/Deputy Registrar or the Assistant Registrar, as the case may be at the Headquarters of a Bench or Benches having jurisdiction to hear the appeals in respect of which the Stay Application arises.
b. Where the application for stay relates to demands, though for more than one assessment year but under only a single statutory enactment, then a single stay application would be sufficient in respect of the demands for which the stay is sought. However, separate applications shall be filed for stay of recovery of demands under different enactments. It may however be noted that in Wipro Ltd vs. ITO, 86 ITD 407 (Bang) the Tribunal held that reparate stay petitions should be filed seeking stay and recovery of different assessment years. But the Bombay bench of the Tribunal in Chirangilal S. Gaonkar vs. WTO, 66 TTJ 728 has held that a single afflication can be filed.
c. The application for stay should, as far as possible, be filed in the form as per specimen as at Appendix X.
2. Every application shall be neatly typed on one side of the paper and shall be in English and shall setforth concisely the following:
iv. Summary of facts regarding the demand of the tax, interest, penalty, fine, Estate Duty or any other sum, the recovery of which is sought to be stayed;
v. The result of the appeal filed before the Commissioner (Appeals) or the Deputy Commissioner (Appeals), if any;
vi. The exact amount of the tax, interest, penalty, fine, Estate Duty or any other sum demanded, as the case may be, and the amount undisputed therefrom and the amount outstanding;
vii. The date of filing of the appeal before the Tribunal and its number, if known;
viii. Whether any application for stay was made to the revenue authorities concerned and if so, the result thereof (copies of correspondence, if any, with the Revenue authorities to be attached);
ix. Reasons in brief for seeking the stay;
x. Whether the applicant is prepared to offer any security in respect of the demand of tax in dispute and if so, in what form;
xi. Prayer to be mentioned clearly and concisely (stating exact amount sought to be stayed);
xii. The contents of the application shall be supported by an affidavit sworn by the applicant or his duly authorised agent; (Specimen application is enclosed)
A specimen Stay Petition
CITC Ltd. vs. Deputy Commissioner of Income Tax
Index
Page Nos.
1. Stay application with Annexure giving detailed reasons for seeking stay
2. Exhibits :
a. Copy of stay application filed before Assessing Officer.
b. Copy of letter rejecting the stay application passed by Assessing Officer
c. Copy of stay application filed before Commissioner
d. Copy of letter rejecting the stay application passed by Commissioner.
e. Copy of the acknowledgment of appeal filed before the Tribunal.
3. Affidavit in support
Appendix - X
(Specimen Form of Stay Application)
IN THE INCOME TAX APPELLATE TRIBUNAL
——————— BENCH
STAY APPLICATION No. ————— of ————
IN THE CASE OF ———————— FOR THE ASSESSMENT YEAR(S) —————
UNDER THE ———— ACT, ———— FOR STAY OF RECOVERY OF TAX/INTEREST/
PENALTY/FINE/OTHER ITEMS
1 Name and address of the applicant :
2 Act under which the demand is raised (i.e. Income-tax etc. for which stay application is moved) :
3 Assessment year(s) involved :
4 Date of filing of appeal before the Tribunal and its number, if known :
5 From the demand give break up :
Tax :
Interest :
Penalty :
Fine :
Others :
6 (a) Amount already paid :
(b) Amount outstanding :
(c) Amount which is not disputed out of (b) :
7 (a) Details of application for stay made to the revenue authorities. :
1. A.O. 2. C.I.T. :
(b) Result :
8 * Reasons for seeking stay : Annexure 'A'
(a) Whether the applicant is prepared to offer security :
(b) If yes, in what form :
9 Prayer stating exact amount soughtto be stayed :
10 If stay is sought in relation to a matter pending in reference before the High Court give full particulars of R.A. No. and date etc. :
Date : Signature of applicant
* Separate sheet may be used if space is not sufficient
Note:
1. The application shall be made in triplicate and shall be neatly typed on one side of the paper with copies of all the relevant document including demand notice, copies of correspondence with the Revenue Authorities for stay of demand and copies of the letter refusing stay of demand.
2. The content of the application shall be supported by affidavit duly sworn in by the applicant or his authorised agent.
3. The application shall be presented by the applicant in person or by his authorised agent or sent by registered post to the Bench of the Tribunal where appeal was filed or which has got jurisdiction to hear the appeal.
Annexure 'A'
Before the Income Tax Appellate Tribunal Bombay
Stay Application No.—————— of 1999
CITC Ltd.
Bombay - 400 058 .... Petitioner
Versus
Deputy Commissioner of Income tax,
Asst. Range, IV (A), Bombay .... Respondent
The humble application of the petitioner above named most respectfully sheweth:
1. The Petitioner is a company engaged in the business of house building activities for CIDCO, PWD etc. The relevant Assessment Year is 1996-97 (previous year ending on 31-3-1996). The Petitioner Company filed the return of income on 29-7-96 showing income of Rs.2,00,000/-. The Petitioner had maintained regular books of account and shown the profit as per the books of account maintained by them. The Petitioner further states that for earlier years also, the books of account maintained by the Petitioner has been accepted by the Assessing Officer. The Deputy Commissioner of Income-tax, Asst. Range rejected the book results of the Petitioner and estimated the income of the Petitioner at 10% of the gross receipts and assessed the income of the Petitioner at Rs.10,00,000/- (Hereto marked Exhibit 'A' is the copy of the order passed by the Deputy Commissioner of Income-tax.)
2. Being aggrieved by the order of the Deputy Commissioner of Income-tax, the Petitioner filed an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals), reduced the income estimated by the Deputy Commissioner of Income-tax to 5% of the gross receipts and confirmed the balance addition made by the Deputy Commissioner of Income-tax, though in the earlier years net profit shown by the Petitioner at 3% was accepted by the Income-tax authorities. [Hereto marked Exhibit 'B' is the copy of the order passed by the CIT (A)].
3. Being aggrieved by the order of the Commissioner of Income-tax (Appeals), the Petitioner filed an appeal before the Tribunal on 1-4-1999 and the same is pending.
4. The Petitioner submits that the estimate of income confirmed by the Commissioner of Income-tax (Appeals) was not correct. In the past also the book results of the Petitioner was accepted by the Income-tax authorities.
5. The Petitioner states that though the appeal is pending before the Tribunal, the Deputy Commissioner of Income-tax started the recovery proceedings against the Petitioner. The Petitioner vide their letter dated 1-4-99 requested the Assessing Officer to keep the demand in abeyance till the decision of the Hon'ble Tribunal. However, the Assessing Officer vide his letter dated 15-4-99 rejected the petition of the Petitioner and refused to keep the demand in abeyance, till the decision of the Hon'ble Tribunal.
6. Thereafter, the Petitioners vide their letter dated 16-4-99 requested the Commissioner of Income-tax to keep the demand of tax in abeyance till the decision of the Hon'ble Tribunal. However, the Hon'ble Commissioner vide his letter dated 20-4-99 rejected the application of the Petitioner to keep the demand in abeyance till the decision of the Hon'ble Tribunal. Hereto marked Exhibits 'C' 'D' 'E' and 'F' are the correspondence with the tax authorities.
7. The Petitioner further states that they are not having bank balance or liquidity to make the payment of tax in dispute and if the department proceeds further to recover the tax in dispute, great hardship will be caused to the Petitioner and the business of the Petitioner may be ruined. The Petitioner is also enclosing herewith the latest balance sheet of the company and the bank statement to show that, the financial status and the bank balance as of date (Hereto marked exhibit 'G' is the copy of Balance Sheet and exhibit 'H' is the copy of bank statement).
8. The petitioner further states that they are prepared to offer the assets of the Company as security for satisfaction of the department.
9. The Petitioner, therefore, prays:
a. That the Recovery Proceedings initiated against the Petitioner may be stayed till the disposal of appeal by the Hon'ble Tribunal.
b. The Deputy Commissioner of Income-tax, or the Commissioner of Income-tax or their subordinates or their successors may be restrained from taking any action as regards recovery of tax, interest and penalty levied or leviable for the relevant assessment year.
c. The hearing of the Appeal may be expedited.
d. Any other relief which the Hon'ble members may deem fit and proper in the nature and circumstances of the case may be granted.
I, the Director of CITC Ltd., state that whatever is stated hereinabove in the Stay Petition is true to the best of my knowledge and information.
Dated this
27th day of April, 1999 at Bombay For CIT Ltd.
Director
Affidavit
I, S. S. K., Director of CITC Ltd., having office at Andheri (West) Bombay - 400 058, do hereby on solomn affirmation state as under:
1. That we have filed the return of income of the Company showing income of Rs.2,00,000.
2. That the Deputy Commissioner of Income-tax assessed the income of the company at Rs.10,00,000.
3. That in appeal, the Commissioner of Income-tax (Appeals) partly reduced the additions made by the Deputy Commissioner of Income-tax.
4. That being aggrieved by the order of the Commissioner of Income Tax (Appeals), we have filed an appeal to the Tribunal and the same is pending.
5. That we are sure that we have a fair chance of succeeding in appeal before the Tribunal.
6. That we have no liquidity or bank balance to make the payment of tax in dispute.
I say that whatever is stated hereinabove and in the Stay Petition of even date is true to the best of my knowledge and believe the same to be true.
Solemnly affirmed at Bombay on the 27th day of April, 1999.
Identified by me
Director
Before Me.
1. Sections 220 to 232 of the Income-tax Act deals with collection and recovery of taxes. These provisions will become active every year in the months of February and March. Probably each officer or Commissioner may have to report to the higher authority the taxes outstanding, and total collection of taxes in their charge. As the scope of this Article is very limited. I will not deal with various controversial issues of Recovery Proceedings and will restrict only to few provisions which are useful in our day-to-day practice.
2. Recovery proceedings under the Act can be started against a person only when he is in default or deemed to be in default in making payment of taxes. The assessee who is in default or is deemed to be in default in making payment of taxes may make an application, requesting the Assessing Officer not to treat him as the assessee in default in respect of the amount in dispute in the appeal preferred by the assessee. The Assessing Officer may in his discretion and with or without imposing any conditions pass an order, not treating the assessee as an assessee in default in respect of such disputed amount till the appeal is pending.
3. It may be noted that mere filing of an appeal does not suo motu stay the proceedings of recovery of the tax in demand. Therefore, it is necessary that as soon as an order raising the demand is received, assessee must make an application to stay and keep the demand in abeyance.
4. While filing Stay application before the Assessing Officer, the assessee will have to give the brief facts as under:
1. The assessment history of the assessee,
2. His conduct and co-operation with the department,
3. Points raised in the appeal,
4. The chances of recovery in case the appeal is dismissed and
5. The hardship that would be caused to the assessee by persistent demand of the tax by the department.
5. If an assessee's application u/s. 220(6) is not replied by the Assessing Officer, even though the same was filed in time, the assessee can always contend before the Tax Recovery Officer that before taking any action against the assessee, his application for stay of demand should be disposed of. The Tax Recovery Officer can also consider the assessee's applications u/s. 225(1) and grant time for the payment of any tax till the disposal of the assessee's appeal by the First Appellate Authority.
6. In the event of Assessing Officer rejecting assessee's application u/s. 220(6) of the Income-tax Act, the assessee can prefer an application to the Commissioner of Income-tax under whose jurisdiction assessee's case falls for staying the demand of tax in dispute till the hearing and final disposal of the assessee's appeal by the Commissioner of Income-tax (Appeals).
7. If the Commissioner fails to discharge his duty, the assessee may file a Writ Petition under Article 226 of the Constitution of India. However, when an appeal is pending before the Income Tax Appellate Tribunal, the assessee can file a Stay Petition before the Income Tax Appellate Tribunal to stay the recovery proceedings.
8. The Central Board of Direct taxes in its circular No.530 dated 6-3-1989 [176 ITR St. (240) and Circular No. 589 dated 16-1-1991, 187 ITR St. (79)] has laid down the guidelines for the Assessing Officer to exercise his jurisdiction u/s. 220(6) of the Act where an assessee has preferred an appeal.
9. The discretionary power conferred by section 220 (6) upon the Assessing Officer is coupled with a duty and if he does not exercise it when the occasion calls for it or if he exercise it in such a manner that it is no exercise of discretion at all, he can be compelled to discharge his duty by an order of the court.
[Ladhuram Taparia vs. B. K. Bagchi, 20 ITR 51, (Cal.) Shivangi Steels P. Ltd. vs ACIT, 226 ITR 62, 63 (All)]
10. Protective recovery of tax is not permissible even though protective assessment can be validly made. [Sunil Kumar vs. CIT, 139 ITR 880 (Bom.)]
11. Representative assessee
Where an assessee dies before the issue of the certificate, unless his legal representatives are served with a notice of demand under section 156 and they fail to comply with that notice within 30 days from the date of receipt of the notice, they cannot be said to be "assessee in default" and consequently no recovery proceedings can be taken against them. [Satya Pal Verma vs. ITO, 106 ITR 540 (All) : Bai Chandanben Jivanlal vs. I. D. Joshi, Collector, 74 ITR 448, (Guj)]
A recovery certificate issued or drawn up by Tax Recovery Officer against a person who is already dead, is a nullity. The certificate must be against a defaulter who is alive. [Isha Beevi vs. TRO, 80 ITR 82, (Ker) on appeal 101 ITR 449, (SC)]. If an assessee in default dies before the issue of a certificate in his name, proceedings under Section 159 of the Act are necessary to bring on record the name or names of the legal representative or representatives.
12. Filing of claims
If any part of the property of an applicant is illegally or unjustifiably attached, an objection under rule 11(1) of the second Schedule to the Act may be filed by him before the Tax Recovery Officer who has got the jurisdiction to adjudicate upon it.
Rule 58(a) of the Order XXI of C.P.C. provides that the claim should be preferred before the property so attached is sold.
Where a claim or objection is made under rule 11 against attachment of a property in execution of a recovery certificate, it is the bounden duty of the Tax Recovery Officer to first dispose of the objection and then to proceed further. Investigation of a claim properly filed is essential. Even if the property to which the claim or objection applies has been advertised for sale, the Tax Recovery Officer ordering the sale may postpone it, pending such investigation.
Where a claim or an objection preferred under rule 11(1) of the Second Schedule is rejected or dismissed, the party against whom an order rejecting or dismissing the claim or objection is made may institute a suit, under rule 11(6), in a Civil Court to establish the right which he claims to the property. In Sawai Singhai vs. Union of India (AIR) 1966 SC 1968), the Supreme Court observed that the suit brought under Order 21, rule 63 (corresponding to rule 11 (6) of the Second Schedule), concerns not only with the question of possession but also with the question of title.
13. The Hon'ble A. P. High Court in ITO vs. Khalid Mehdi Khan (minor) 110 ITR 79, has taken the view that the Tribunal can not only stay the recovery proceedings but can also stay the proceedings before the Assessing Officer. Therefore, in a case where order under section 263 is passed and if the appeal is pending before Tribunal and in the meantime, if the Assessing Officer starts the assessment proceedings then in such circumstances, the assessee can file stay petition before the Tribunal and the Tribunal can stay the proceedings before the Assessing Officer. Please also see Ritz Hdrs Vyas, 185 ITR 311 (Bom).
14. The Hon'ble Supreme Court in CIT vs. Bansi Dhar & Sons 157 ITR 665 has taken the view that the Tribunal can also stay the proceedings when the reference is pending before the High Court. Therefore, in cases where the assessee has lost before the Tribunal and the reference is pending before the High Court and if the assessee is in a position to establish that he is not in a position to make the payment of tax in dispute, in such circumstances, the Tribunal can stay the proceedings till the disposal of the reference by the High Court.
15. It may be noted here that, before filing the stay petition, it is necessary that the assessee should approach the Commissioner to stay the recovery proceedings. When Commissioner refuses to stay the recovery proceedings, then only the Tribunal will exercise its power. In case the Commissioner grants instalment facility but the assessee shows his inability to make payment in instalment and the Commissioner rejects the stay application then the power of Tribunal can be invoked for stay. It may be further noted that the assessee must also show that he has no liquidity to pay the tax in dispute and if stay is not granted, great hardship will be caused to the assessee.
16. The Finance (No.2) Act, 1998 with effect from 1-10-1998 inserted sub-section (7) in section 253 prescribing for the first time a fee of five hundred rupees whenever an application for stay of demand has to be filed before the Appellate Tribunal.
17. The Finance Act, 2001 inserted two new proviso to sub-section (2A) of section 254 with effect from 1-6-2001. As per the first proviso, where an order of stay is made in any proceedings relating to an appeal filed under section 253(1), the Tribunal shall dispose of the appeal within a period of one hundred and eighty days from the date of such stay order.
As per the second proviso if such appeal is not so disposed of within the period specified in first proviso, the stay order shall stand vacated after the expiry of the said period.
In view of the specific language of the aforesaid second proviso, it is not only desirable but imperative on the part of the assessee to file an application for extension of the stay or granting of fresh stay, well in time before the expiry of the impugned six months period.
18. Rule 35A of the Income Tax Appellate Tribunal Rules, prescribes the procedure for filing the Stay Petition. As per this rule, any assessee filing an appeal under taxation Laws, before the Income Tax Appellate Tribunal may prefer stay application in the following manner.
1.
a. Every application for stay of recovery of demand of tax, interest, penalty, fine, Estate Duty or any other sum shall be presented in Triplicate by the applicant in person, or by his duly authorised agent, or sent by Registered Post to the Registrar/Deputy Registrar or the Assistant Registrar, as the case may be at the Headquarters of a Bench or Benches having jurisdiction to hear the appeals in respect of which the Stay Application arises.
b. Where the application for stay relates to demands, though for more than one assessment year but under only a single statutory enactment, then a single stay application would be sufficient in respect of the demands for which the stay is sought. However, separate applications shall be filed for stay of recovery of demands under different enactments. It may however be noted that in Wipro Ltd vs. ITO, 86 ITD 407 (Bang) the Tribunal held that reparate stay petitions should be filed seeking stay and recovery of different assessment years. But the Bombay bench of the Tribunal in Chirangilal S. Gaonkar vs. WTO, 66 TTJ 728 has held that a single afflication can be filed.
c. The application for stay should, as far as possible, be filed in the form as per specimen as at Appendix X.
2. Every application shall be neatly typed on one side of the paper and shall be in English and shall setforth concisely the following:
iv. Summary of facts regarding the demand of the tax, interest, penalty, fine, Estate Duty or any other sum, the recovery of which is sought to be stayed;
v. The result of the appeal filed before the Commissioner (Appeals) or the Deputy Commissioner (Appeals), if any;
vi. The exact amount of the tax, interest, penalty, fine, Estate Duty or any other sum demanded, as the case may be, and the amount undisputed therefrom and the amount outstanding;
vii. The date of filing of the appeal before the Tribunal and its number, if known;
viii. Whether any application for stay was made to the revenue authorities concerned and if so, the result thereof (copies of correspondence, if any, with the Revenue authorities to be attached);
ix. Reasons in brief for seeking the stay;
x. Whether the applicant is prepared to offer any security in respect of the demand of tax in dispute and if so, in what form;
xi. Prayer to be mentioned clearly and concisely (stating exact amount sought to be stayed);
xii. The contents of the application shall be supported by an affidavit sworn by the applicant or his duly authorised agent; (Specimen application is enclosed)
A specimen Stay Petition
CITC Ltd. vs. Deputy Commissioner of Income Tax
Index
Page Nos.
1. Stay application with Annexure giving detailed reasons for seeking stay
2. Exhibits :
a. Copy of stay application filed before Assessing Officer.
b. Copy of letter rejecting the stay application passed by Assessing Officer
c. Copy of stay application filed before Commissioner
d. Copy of letter rejecting the stay application passed by Commissioner.
e. Copy of the acknowledgment of appeal filed before the Tribunal.
3. Affidavit in support
Appendix - X
(Specimen Form of Stay Application)
IN THE INCOME TAX APPELLATE TRIBUNAL
——————— BENCH
STAY APPLICATION No. ————— of ————
IN THE CASE OF ———————— FOR THE ASSESSMENT YEAR(S) —————
UNDER THE ———— ACT, ———— FOR STAY OF RECOVERY OF TAX/INTEREST/
PENALTY/FINE/OTHER ITEMS
1 Name and address of the applicant :
2 Act under which the demand is raised (i.e. Income-tax etc. for which stay application is moved) :
3 Assessment year(s) involved :
4 Date of filing of appeal before the Tribunal and its number, if known :
5 From the demand give break up :
Tax :
Interest :
Penalty :
Fine :
Others :
6 (a) Amount already paid :
(b) Amount outstanding :
(c) Amount which is not disputed out of (b) :
7 (a) Details of application for stay made to the revenue authorities. :
1. A.O. 2. C.I.T. :
(b) Result :
8 * Reasons for seeking stay : Annexure 'A'
(a) Whether the applicant is prepared to offer security :
(b) If yes, in what form :
9 Prayer stating exact amount soughtto be stayed :
10 If stay is sought in relation to a matter pending in reference before the High Court give full particulars of R.A. No. and date etc. :
Date : Signature of applicant
* Separate sheet may be used if space is not sufficient
Note:
1. The application shall be made in triplicate and shall be neatly typed on one side of the paper with copies of all the relevant document including demand notice, copies of correspondence with the Revenue Authorities for stay of demand and copies of the letter refusing stay of demand.
2. The content of the application shall be supported by affidavit duly sworn in by the applicant or his authorised agent.
3. The application shall be presented by the applicant in person or by his authorised agent or sent by registered post to the Bench of the Tribunal where appeal was filed or which has got jurisdiction to hear the appeal.
Annexure 'A'
Before the Income Tax Appellate Tribunal Bombay
Stay Application No.—————— of 1999
CITC Ltd.
Bombay - 400 058 .... Petitioner
Versus
Deputy Commissioner of Income tax,
Asst. Range, IV (A), Bombay .... Respondent
The humble application of the petitioner above named most respectfully sheweth:
1. The Petitioner is a company engaged in the business of house building activities for CIDCO, PWD etc. The relevant Assessment Year is 1996-97 (previous year ending on 31-3-1996). The Petitioner Company filed the return of income on 29-7-96 showing income of Rs.2,00,000/-. The Petitioner had maintained regular books of account and shown the profit as per the books of account maintained by them. The Petitioner further states that for earlier years also, the books of account maintained by the Petitioner has been accepted by the Assessing Officer. The Deputy Commissioner of Income-tax, Asst. Range rejected the book results of the Petitioner and estimated the income of the Petitioner at 10% of the gross receipts and assessed the income of the Petitioner at Rs.10,00,000/- (Hereto marked Exhibit 'A' is the copy of the order passed by the Deputy Commissioner of Income-tax.)
2. Being aggrieved by the order of the Deputy Commissioner of Income-tax, the Petitioner filed an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals), reduced the income estimated by the Deputy Commissioner of Income-tax to 5% of the gross receipts and confirmed the balance addition made by the Deputy Commissioner of Income-tax, though in the earlier years net profit shown by the Petitioner at 3% was accepted by the Income-tax authorities. [Hereto marked Exhibit 'B' is the copy of the order passed by the CIT (A)].
3. Being aggrieved by the order of the Commissioner of Income-tax (Appeals), the Petitioner filed an appeal before the Tribunal on 1-4-1999 and the same is pending.
4. The Petitioner submits that the estimate of income confirmed by the Commissioner of Income-tax (Appeals) was not correct. In the past also the book results of the Petitioner was accepted by the Income-tax authorities.
5. The Petitioner states that though the appeal is pending before the Tribunal, the Deputy Commissioner of Income-tax started the recovery proceedings against the Petitioner. The Petitioner vide their letter dated 1-4-99 requested the Assessing Officer to keep the demand in abeyance till the decision of the Hon'ble Tribunal. However, the Assessing Officer vide his letter dated 15-4-99 rejected the petition of the Petitioner and refused to keep the demand in abeyance, till the decision of the Hon'ble Tribunal.
6. Thereafter, the Petitioners vide their letter dated 16-4-99 requested the Commissioner of Income-tax to keep the demand of tax in abeyance till the decision of the Hon'ble Tribunal. However, the Hon'ble Commissioner vide his letter dated 20-4-99 rejected the application of the Petitioner to keep the demand in abeyance till the decision of the Hon'ble Tribunal. Hereto marked Exhibits 'C' 'D' 'E' and 'F' are the correspondence with the tax authorities.
7. The Petitioner further states that they are not having bank balance or liquidity to make the payment of tax in dispute and if the department proceeds further to recover the tax in dispute, great hardship will be caused to the Petitioner and the business of the Petitioner may be ruined. The Petitioner is also enclosing herewith the latest balance sheet of the company and the bank statement to show that, the financial status and the bank balance as of date (Hereto marked exhibit 'G' is the copy of Balance Sheet and exhibit 'H' is the copy of bank statement).
8. The petitioner further states that they are prepared to offer the assets of the Company as security for satisfaction of the department.
9. The Petitioner, therefore, prays:
a. That the Recovery Proceedings initiated against the Petitioner may be stayed till the disposal of appeal by the Hon'ble Tribunal.
b. The Deputy Commissioner of Income-tax, or the Commissioner of Income-tax or their subordinates or their successors may be restrained from taking any action as regards recovery of tax, interest and penalty levied or leviable for the relevant assessment year.
c. The hearing of the Appeal may be expedited.
d. Any other relief which the Hon'ble members may deem fit and proper in the nature and circumstances of the case may be granted.
I, the Director of CITC Ltd., state that whatever is stated hereinabove in the Stay Petition is true to the best of my knowledge and information.
Dated this
27th day of April, 1999 at Bombay For CIT Ltd.
Director
Affidavit
I, S. S. K., Director of CITC Ltd., having office at Andheri (West) Bombay - 400 058, do hereby on solomn affirmation state as under:
1. That we have filed the return of income of the Company showing income of Rs.2,00,000.
2. That the Deputy Commissioner of Income-tax assessed the income of the company at Rs.10,00,000.
3. That in appeal, the Commissioner of Income-tax (Appeals) partly reduced the additions made by the Deputy Commissioner of Income-tax.
4. That being aggrieved by the order of the Commissioner of Income Tax (Appeals), we have filed an appeal to the Tribunal and the same is pending.
5. That we are sure that we have a fair chance of succeeding in appeal before the Tribunal.
6. That we have no liquidity or bank balance to make the payment of tax in dispute.
I say that whatever is stated hereinabove and in the Stay Petition of even date is true to the best of my knowledge and believe the same to be true.
Solemnly affirmed at Bombay on the 27th day of April, 1999.
Identified by me
Director
Before Me.
Garnishee Proceedings For Tax Arrears
Garnishee Proceedings For Tax Arrears
Section 226(3) of the Income-tax Act, 1961, empowers the Assessing Officer (AO) or Tax Recovery Officer to direct any person from whom money is due to the tax-payer who is in default, to pay such amount directly to the tax department. For doing so, a notice in writing has to be issued to the person from whom recovery is to be made of the dues of an assessee. The essential criterion for a notice is that, on the date of service of notice, the person served should be under an existing liability to pay an amount to the assessee (P K Trading v. I.T.O. (78 I.T.R. 427)), though the liability may be required to be discharged (i.e. the amount may become payable to the assessee) at a later date. However, the notice cannot operate in respect of a liability which is not in existence at all on the date the notice is served (Buddha v. I.T.O. (52 I.T.R. 321)), nor in respect of a time-barred debt (Rajakumari v. T.R.C. (116 I.T.R. 306)).
A notice under this sub-section cannot be issued to the Official Liquidator appointed by the Court for winding up a company, without prior leave of the Court (State v. Topno (36 I.T.R. 135)). Section 226(3) cannot be resorted to as a credit-freeze in the case of an unutilized overdraft account in a bank (Adam v. I.T.O. (33 I.T.R. 26)), or for appropriating a grant due from a statutory authority to the assessee which the authority can legally give, and the assessee is bound to use, only for certain specific purposes (Coal Products v. I.T.O. (85 I.T.R. 347)).
If a person to whom a notice is sent and who does not deny his liability to the assessee, fails to make payment as demanded, he would be deemed to be an assessee in default and recovery proceedings may be taken against him for realization of the amount as if it were an arrear of tax due from him (Lakshmi Comm Bank v. Dharam Singh (94 I.T.R. 416)). If the person in disregard of the notice makes the payment to the assessee he would be personally liable to the extent of the payment made to the assessee or to the extent of the amount of tax or other sum due from the assessee, whichever is less.
However, if it is discovered that his statement was false in any material particular, he would be personally liable to the Department to the extent of his own liability to the assessee, or to the extent of the assessee’s liability for any sum due under the Act, whichever is less (Southern Textiles v. I.T.O. (83 I.T.R. 790)).
The burden of showing that the statement is false is on the AO or the TRO; he is bound to conduct a quasi-judicial inquiry, disclosing to the person concerned all relevant material on which he proposes to rely, and reach a quasi-judicial decision (Beharilal v. I.T.O. (131 I.T.R. 129 (SC))). The person making such a false statement may also be liable to prosecution under section 277. In Raj Breweries Ltd. v. Government of India ((2003) 128 Taxman 501), the facts were that the petitioners were companies with dominant shareholding by a company ‘SW’. The petitioners supplied liquor to the respondent, Canteen Stores Department of the Ministry of Defence. An amount was outstanding from the assessee towards income-tax and to recover it, a notice had been issued by the TRO under section 226(3) to the respondent directing it to stop payment which was due to the assessee.
The grievance of the petitioners was that on the basis of that notice, the respondent stopped making any payment to them for the supplies which they had already made to the respondent. They contended that their income was independent of that of the ‘SW’ and, therefore, if ‘SW’ was in default of any amount as arrived at by its AO, the recovery could not be transferred and effected against them.
On the other hand, the respondent submitted that the entire contractual relationship with respect to supply of liquor was between the Defence Ministry and company ‘SW’. All necessary documents were signed by company ‘SW’ with the respondent. All the supplies made by the present petitioners were on behalf of the company ‘SW’.
The Bombay High Court held that the language of section 226(3)(vi) permits a person to whom a notice is sent to lodge his objections and, after those objections are raised, there is also a provision under clause (vii) that thereafter the notice can be revoked. Undoubtedly, the section provides for these objections being raised by a person to whom the notice is sent. In the instant case, respondent No. 1 to whom the notice was sent had chosen to abide by it and not raise objections.
However, it was the petitioners who were the affected parties and, therefore, the provision could be read to permit such sufferers to raise objections before the AO. In fact, the petitioners contended that even if their predominant shareholding was by ‘SW’ (except in the case of two companies), they were assessed to income-tax independently and the amounts attached under the impugned notices were their income. As against that, the AO had placed sufficient material before the High Court to atleast prima facie satisfy that the entire disputed earning was out of the contractual relationship between the Canteen Stores Department and ‘SW’ and that it was the income of ‘SW’. Having been satisfied that there was sufficient material before the AO to justify his action, the Court held that his order was valid.
The High Court therefore held that the Tax Recovery Officer was fully justified in invoking his power under section 226(3) by issuing a notice to the Canteen Stores Department, Government of India.
Section 226(3) of the Income-tax Act, 1961, empowers the Assessing Officer (AO) or Tax Recovery Officer to direct any person from whom money is due to the tax-payer who is in default, to pay such amount directly to the tax department. For doing so, a notice in writing has to be issued to the person from whom recovery is to be made of the dues of an assessee. The essential criterion for a notice is that, on the date of service of notice, the person served should be under an existing liability to pay an amount to the assessee (P K Trading v. I.T.O. (78 I.T.R. 427)), though the liability may be required to be discharged (i.e. the amount may become payable to the assessee) at a later date. However, the notice cannot operate in respect of a liability which is not in existence at all on the date the notice is served (Buddha v. I.T.O. (52 I.T.R. 321)), nor in respect of a time-barred debt (Rajakumari v. T.R.C. (116 I.T.R. 306)).
A notice under this sub-section cannot be issued to the Official Liquidator appointed by the Court for winding up a company, without prior leave of the Court (State v. Topno (36 I.T.R. 135)). Section 226(3) cannot be resorted to as a credit-freeze in the case of an unutilized overdraft account in a bank (Adam v. I.T.O. (33 I.T.R. 26)), or for appropriating a grant due from a statutory authority to the assessee which the authority can legally give, and the assessee is bound to use, only for certain specific purposes (Coal Products v. I.T.O. (85 I.T.R. 347)).
If a person to whom a notice is sent and who does not deny his liability to the assessee, fails to make payment as demanded, he would be deemed to be an assessee in default and recovery proceedings may be taken against him for realization of the amount as if it were an arrear of tax due from him (Lakshmi Comm Bank v. Dharam Singh (94 I.T.R. 416)). If the person in disregard of the notice makes the payment to the assessee he would be personally liable to the extent of the payment made to the assessee or to the extent of the amount of tax or other sum due from the assessee, whichever is less.
However, if it is discovered that his statement was false in any material particular, he would be personally liable to the Department to the extent of his own liability to the assessee, or to the extent of the assessee’s liability for any sum due under the Act, whichever is less (Southern Textiles v. I.T.O. (83 I.T.R. 790)).
The burden of showing that the statement is false is on the AO or the TRO; he is bound to conduct a quasi-judicial inquiry, disclosing to the person concerned all relevant material on which he proposes to rely, and reach a quasi-judicial decision (Beharilal v. I.T.O. (131 I.T.R. 129 (SC))). The person making such a false statement may also be liable to prosecution under section 277. In Raj Breweries Ltd. v. Government of India ((2003) 128 Taxman 501), the facts were that the petitioners were companies with dominant shareholding by a company ‘SW’. The petitioners supplied liquor to the respondent, Canteen Stores Department of the Ministry of Defence. An amount was outstanding from the assessee towards income-tax and to recover it, a notice had been issued by the TRO under section 226(3) to the respondent directing it to stop payment which was due to the assessee.
The grievance of the petitioners was that on the basis of that notice, the respondent stopped making any payment to them for the supplies which they had already made to the respondent. They contended that their income was independent of that of the ‘SW’ and, therefore, if ‘SW’ was in default of any amount as arrived at by its AO, the recovery could not be transferred and effected against them.
On the other hand, the respondent submitted that the entire contractual relationship with respect to supply of liquor was between the Defence Ministry and company ‘SW’. All necessary documents were signed by company ‘SW’ with the respondent. All the supplies made by the present petitioners were on behalf of the company ‘SW’.
The Bombay High Court held that the language of section 226(3)(vi) permits a person to whom a notice is sent to lodge his objections and, after those objections are raised, there is also a provision under clause (vii) that thereafter the notice can be revoked. Undoubtedly, the section provides for these objections being raised by a person to whom the notice is sent. In the instant case, respondent No. 1 to whom the notice was sent had chosen to abide by it and not raise objections.
However, it was the petitioners who were the affected parties and, therefore, the provision could be read to permit such sufferers to raise objections before the AO. In fact, the petitioners contended that even if their predominant shareholding was by ‘SW’ (except in the case of two companies), they were assessed to income-tax independently and the amounts attached under the impugned notices were their income. As against that, the AO had placed sufficient material before the High Court to atleast prima facie satisfy that the entire disputed earning was out of the contractual relationship between the Canteen Stores Department and ‘SW’ and that it was the income of ‘SW’. Having been satisfied that there was sufficient material before the AO to justify his action, the Court held that his order was valid.
The High Court therefore held that the Tax Recovery Officer was fully justified in invoking his power under section 226(3) by issuing a notice to the Canteen Stores Department, Government of India.
Thursday, December 23, 2010
Delhi HC stays service tax on immovable property rental, ping-pongs question back to apex court
Wednesday, 15 December 2010
Exclusive: The Delhi High Court has again stayed the imposition of service tax imposition on immovable property rentals in one of the Home Solutions cases, reaffirming its earlier stance. The order contradicted a Punjab & Haryana High Court order and put the ball back into the Supreme Court, which had asked for the Delhi High Court to adjudicate.
The Delhi High Court division bench comprising of Delhi High Court Chief Justice Dipak Mishra and justice Manmohan pressed for early adjudication of the matter by the apex court while observing the recent conflicting Punjab & Haryana High Court’s order to be merely persuasive and not binding.
Naik Paranjpe & Co partner Ameet Naik assisted by advocate Rishi Agarwal had instructed senior counsel Harish Salve for clients Home Solutions in the final hearing of the Delhi High Court petition filed against the imposition and retrospective applicability of service tax on property rentals. A fresh petition had been filed in 2010 to challenge the post-budget amendment of the Finance Act 2010 which facilitated such a levy.
Additional Solicitor General AS Chandiok has been representing the governement in the matters.
Naik said that the court referred to its April 2009 judgement (see background below) to conclude prima facie that a Finance Act amendment had not removed the earlier judgement’s substratum, which was directly conclusive of the fact that "mere renting of immovable property was not service since there was no value addition".
“The Hon'ble High Court of Delhi was of the view that if the earlier view of the Hon'ble Delhi High Court was to be accepted then the writ petitions may have to be allowed but in case it was not to be accepted then the matter may have to be referred to a larger bench. During the course of arguments it was also informed to the Hon'ble Delhi High Court that the earlier judgment of Home Solutions was in appeal before the Hon'ble Supreme Court,” said a Naik.
He explained: “After hearing the parties, the Hon'ble Delhi High Court thought it proper to record the joint statement of the counsels for the petitioners and the respondents that they would be mentioning the SLP in Home Solutions Judgment before the Hon'ble Supreme Court for early disposal since it would directly impact the decision in the Hon'ble Delhi High Court.”
The Delhi HC allowed the interim stay to remain operative while concluding that the Supreme Court would be the final authority to decide on the substantive questions
Background
At the heart of the case is the validity or effectiveness of a statutory amendment to justify value added services tax liability on immovable property rentals.
Home Solutions had filed two petitions filed in the Delhi High Court. In April 2009 the company tried to set aside service tax sought to be charged on commercial property rentals, which resulted in Home Solution winning a favourable order under which a stay was granted.
Thereafter, through a post-budget Finance Act amendment of 2010, the legislature tried to broaden the scope of the charging section by extending the definition of Section 65 (105) (zzz). The amendment substituted the applicability of the tax “in relation to … by renting of immovable property or any other service in relation to such renting”.
The earlier definition had stated: “in relation to the renting of immovable property”. The purported intention was to extend the scope so as to ensure levy even on the mere act of renting out immovable property without offering any rationale for so doing.
The amendment was introduced after the government had failed in a Supreme Court special leave petition (SLP) to stay the April 2009 Delhi High Court order won by Home Solutions.
In principle, this constituted the grounds of the second petition, which Home Solutions also filed in the Delhi High Court before a different bench in May 2010.
In the May 2010 the Delhi High Court order on the recovery of service tax was stayed yet again in respect of immovable property alone and it was clarified that second part of the charging provision relating to recovery of tax on “any other service in relation to such renting” would remain operational.
Wednesday, 15 December 2010
Exclusive: The Delhi High Court has again stayed the imposition of service tax imposition on immovable property rentals in one of the Home Solutions cases, reaffirming its earlier stance. The order contradicted a Punjab & Haryana High Court order and put the ball back into the Supreme Court, which had asked for the Delhi High Court to adjudicate.
The Delhi High Court division bench comprising of Delhi High Court Chief Justice Dipak Mishra and justice Manmohan pressed for early adjudication of the matter by the apex court while observing the recent conflicting Punjab & Haryana High Court’s order to be merely persuasive and not binding.
Naik Paranjpe & Co partner Ameet Naik assisted by advocate Rishi Agarwal had instructed senior counsel Harish Salve for clients Home Solutions in the final hearing of the Delhi High Court petition filed against the imposition and retrospective applicability of service tax on property rentals. A fresh petition had been filed in 2010 to challenge the post-budget amendment of the Finance Act 2010 which facilitated such a levy.
Additional Solicitor General AS Chandiok has been representing the governement in the matters.
Naik said that the court referred to its April 2009 judgement (see background below) to conclude prima facie that a Finance Act amendment had not removed the earlier judgement’s substratum, which was directly conclusive of the fact that "mere renting of immovable property was not service since there was no value addition".
“The Hon'ble High Court of Delhi was of the view that if the earlier view of the Hon'ble Delhi High Court was to be accepted then the writ petitions may have to be allowed but in case it was not to be accepted then the matter may have to be referred to a larger bench. During the course of arguments it was also informed to the Hon'ble Delhi High Court that the earlier judgment of Home Solutions was in appeal before the Hon'ble Supreme Court,” said a Naik.
He explained: “After hearing the parties, the Hon'ble Delhi High Court thought it proper to record the joint statement of the counsels for the petitioners and the respondents that they would be mentioning the SLP in Home Solutions Judgment before the Hon'ble Supreme Court for early disposal since it would directly impact the decision in the Hon'ble Delhi High Court.”
The Delhi HC allowed the interim stay to remain operative while concluding that the Supreme Court would be the final authority to decide on the substantive questions
Background
At the heart of the case is the validity or effectiveness of a statutory amendment to justify value added services tax liability on immovable property rentals.
Home Solutions had filed two petitions filed in the Delhi High Court. In April 2009 the company tried to set aside service tax sought to be charged on commercial property rentals, which resulted in Home Solution winning a favourable order under which a stay was granted.
Thereafter, through a post-budget Finance Act amendment of 2010, the legislature tried to broaden the scope of the charging section by extending the definition of Section 65 (105) (zzz). The amendment substituted the applicability of the tax “in relation to … by renting of immovable property or any other service in relation to such renting”.
The earlier definition had stated: “in relation to the renting of immovable property”. The purported intention was to extend the scope so as to ensure levy even on the mere act of renting out immovable property without offering any rationale for so doing.
The amendment was introduced after the government had failed in a Supreme Court special leave petition (SLP) to stay the April 2009 Delhi High Court order won by Home Solutions.
In principle, this constituted the grounds of the second petition, which Home Solutions also filed in the Delhi High Court before a different bench in May 2010.
In the May 2010 the Delhi High Court order on the recovery of service tax was stayed yet again in respect of immovable property alone and it was clarified that second part of the charging provision relating to recovery of tax on “any other service in relation to such renting” would remain operational.
Procedure for Registration-DVAT.
F1(45)/VAT/Policy/2005-06 Dated: 12-05-05
Sub: Procedure for registration under DVAT Act.
1.
An application for registration under DVAT Act is to be made in form DVAT 04. The application should be accompanied by the following supporting documents :
Mandatory supporting documents
(a)
Annexures of the Form duly filled in (in case any of the annexures is not applicable, same may be mentioned)
(b)
Proof of incorporation of the applicant dealer i.e. Copy of deed of constitution (partnership deed (if any), certificate of registration under the Societies Act, Trust Deed, Memorandum and Articles of Association etc.) duly certified by the authorized signatory.
(c)
Proof of identity of authorized signatory signing the Registration Application Form.
(d)
Two self addressed envelopes (without stamps)
(e)
In case of a dealer applying for registration and simultaneously opting for payment of tax under composition scheme, please attach application in Form DVAT 01 along with this application.
(f)
Proof of Security
Optional Supporting Documents
(a)
Proof of ownership of principle place of business.
(b)
Proof of ownership of residential property by proprietor/managing partner.
(c)
Copy of passport of proprietor/managing partner.
(d)
Copy of Permanent Account Number in the name of business allotted by the Income Tax Department.
(e)
Copy of last electricity bill (The bill should be in the name of business and for the address specified as the main place of business in the registration form)
(f)
Copy of last telephone bill (The bill should be in the name of business and for the address specified as the main place of business in the registration form)
2.
The official receiving the application should scrutinize the application for completeness and tick the cover page of the DVAT 04 regarding the supporting documents submitted by the applicant. The supporting documents should be self-attested by the applicant.
3.
The official should mention the Ward No. on the cover page at the time of receiving application to facilitate the transfer of the registration application to appropriate authority.
4.
Since the process of registration is time bound, the official receiving the application and other concerned officers of the Front Office should ensure that there is no delay in sending the application to the concerned authority for appropriate action. All applications should be sent on the same day & in rare cases by the morning of next working day. The dispatch register shall show the date and time at which the registration was received in the ward.
5.
Since the security amount need to be calculated by the applicant, the official receiving the application should ensure that proper supporting documents with regard to reduction in the security amount are enclosed with the application and the security in the prescribed forms are enclosed in original, as per the statement of the dealer in field NO. 18 of Part A of DVAT 04.
6. It may also need to be checked whether the applicant has enclosed duly filled in DVAT 01, if he intend to opt for composition scheme.
7. The official should also check that none of the field of the application form, has been left blank. In case any field is not applicable, it should be either struck out or be mentioned "Not Applicable".
8. In case the application is not supported with mandatory documents, the application should not be accepted, by the receiving official.
9. The officer required to issue registration needs to dispose off the registration application within a period of 15 days from the date on which the application was received in DVAT Deptt, after conducting such enquiries as he deems fit.
If for some reasons, registration cannot be granted within 15 days then before the expiry of this period, the officer has to issue a notice to the applicant clearly stating the grounds on which his application is proposed to be rejected and permitting him to show cause in writing within next 15 days as to why application for registration should not be rejected. Here, it should be kept in mind that if neither the registration is granted nor the notice is issued by the required date, the applicant shall be deemed to be registered under the DVAT Act and the officer shall issue a Certificate of Registration to such applicant.
In case the applicant furnishes the reply to the notice, the office may either accept the application and register the applicant or reject the application for reasons to be recorded in writing. In case, the applicant fails to respond to the notice within the stipulated time, the application for registration shall stand rejected.
10. The official receiving the application should also ensure that the application is affixed with Court fee of Rs. 500/- each under the DVAT Act as well as CST Act.
11. The registration of application which were submitted before 1/4/05 i.e. under the DST Act 1975, will be processed under the DST Act and in the concerned ward. In case the validity of the dealer is fixed before 1/4/05, then after getting registration under the DST Act, the dealer will deemed to be registered under the DVAT Act w.e.f. 1/4/05 as per Section 24 of the DVAT Act. The surety under such cases shall be prescribed under the DST Act and Central Act.
12. In cases where the liability for registration under DST Act has already arisen prior to 1/4/05 but the dealer has not yet applied for registration (he can apply within 30 days from the date of his liability), such applications shall be accepted in the concerned wards and in case validity of such dealer is fixed prior to 1/4/05, then the registration will be granted under the DST Act 1975. Such dealers will also deemed registered under the DVAT Act by virtue of Section 24 of DVAT Act w.e.f. 1/4/05. Such dealers will also be prescribed security under DST Act and CST Act as the case may be.
13. In case of deciding requirement of security for registration cases mentioned in para 11 & 12 above, the officers may keep in mind the provisions of DVAT Act.
Sd/-
(R.K. VERMA)
Commissioner, VAT
F1(45)/VAT/Policy/2005-06 Dated: 12-05-05
Copy for immediate and follow-up action:
1. PS to Commissioner, VAT.
2. PA to Addl. Commissioners I,II, III & IV.
3. All Joint Commissioners/Dy. Commissioners.
4. All Assessing Authorities/VAT Officers/Asstt. VAT Officers.
5. VAT Officers, Tax Payer Service, Dispute Settlement Unit, Key Dealer Unit, Coordination, Audit, Enforcement .
6. Manager (EDP) with the request to make arrangement for circulation on web site.
7. President, Value Added Tax Bar Association, New Delhi.
8. All Trade Associations.
9. Guard file.
Sd/-
(S.S. Ghonkrokta)
Jt. Commissioner, VAT
F1(45)/VAT/Policy/2005-06 Dated: 12-05-05
Sub: Procedure for registration under DVAT Act.
1.
An application for registration under DVAT Act is to be made in form DVAT 04. The application should be accompanied by the following supporting documents :
Mandatory supporting documents
(a)
Annexures of the Form duly filled in (in case any of the annexures is not applicable, same may be mentioned)
(b)
Proof of incorporation of the applicant dealer i.e. Copy of deed of constitution (partnership deed (if any), certificate of registration under the Societies Act, Trust Deed, Memorandum and Articles of Association etc.) duly certified by the authorized signatory.
(c)
Proof of identity of authorized signatory signing the Registration Application Form.
(d)
Two self addressed envelopes (without stamps)
(e)
In case of a dealer applying for registration and simultaneously opting for payment of tax under composition scheme, please attach application in Form DVAT 01 along with this application.
(f)
Proof of Security
Optional Supporting Documents
(a)
Proof of ownership of principle place of business.
(b)
Proof of ownership of residential property by proprietor/managing partner.
(c)
Copy of passport of proprietor/managing partner.
(d)
Copy of Permanent Account Number in the name of business allotted by the Income Tax Department.
(e)
Copy of last electricity bill (The bill should be in the name of business and for the address specified as the main place of business in the registration form)
(f)
Copy of last telephone bill (The bill should be in the name of business and for the address specified as the main place of business in the registration form)
2.
The official receiving the application should scrutinize the application for completeness and tick the cover page of the DVAT 04 regarding the supporting documents submitted by the applicant. The supporting documents should be self-attested by the applicant.
3.
The official should mention the Ward No. on the cover page at the time of receiving application to facilitate the transfer of the registration application to appropriate authority.
4.
Since the process of registration is time bound, the official receiving the application and other concerned officers of the Front Office should ensure that there is no delay in sending the application to the concerned authority for appropriate action. All applications should be sent on the same day & in rare cases by the morning of next working day. The dispatch register shall show the date and time at which the registration was received in the ward.
5.
Since the security amount need to be calculated by the applicant, the official receiving the application should ensure that proper supporting documents with regard to reduction in the security amount are enclosed with the application and the security in the prescribed forms are enclosed in original, as per the statement of the dealer in field NO. 18 of Part A of DVAT 04.
6. It may also need to be checked whether the applicant has enclosed duly filled in DVAT 01, if he intend to opt for composition scheme.
7. The official should also check that none of the field of the application form, has been left blank. In case any field is not applicable, it should be either struck out or be mentioned "Not Applicable".
8. In case the application is not supported with mandatory documents, the application should not be accepted, by the receiving official.
9. The officer required to issue registration needs to dispose off the registration application within a period of 15 days from the date on which the application was received in DVAT Deptt, after conducting such enquiries as he deems fit.
If for some reasons, registration cannot be granted within 15 days then before the expiry of this period, the officer has to issue a notice to the applicant clearly stating the grounds on which his application is proposed to be rejected and permitting him to show cause in writing within next 15 days as to why application for registration should not be rejected. Here, it should be kept in mind that if neither the registration is granted nor the notice is issued by the required date, the applicant shall be deemed to be registered under the DVAT Act and the officer shall issue a Certificate of Registration to such applicant.
In case the applicant furnishes the reply to the notice, the office may either accept the application and register the applicant or reject the application for reasons to be recorded in writing. In case, the applicant fails to respond to the notice within the stipulated time, the application for registration shall stand rejected.
10. The official receiving the application should also ensure that the application is affixed with Court fee of Rs. 500/- each under the DVAT Act as well as CST Act.
11. The registration of application which were submitted before 1/4/05 i.e. under the DST Act 1975, will be processed under the DST Act and in the concerned ward. In case the validity of the dealer is fixed before 1/4/05, then after getting registration under the DST Act, the dealer will deemed to be registered under the DVAT Act w.e.f. 1/4/05 as per Section 24 of the DVAT Act. The surety under such cases shall be prescribed under the DST Act and Central Act.
12. In cases where the liability for registration under DST Act has already arisen prior to 1/4/05 but the dealer has not yet applied for registration (he can apply within 30 days from the date of his liability), such applications shall be accepted in the concerned wards and in case validity of such dealer is fixed prior to 1/4/05, then the registration will be granted under the DST Act 1975. Such dealers will also deemed registered under the DVAT Act by virtue of Section 24 of DVAT Act w.e.f. 1/4/05. Such dealers will also be prescribed security under DST Act and CST Act as the case may be.
13. In case of deciding requirement of security for registration cases mentioned in para 11 & 12 above, the officers may keep in mind the provisions of DVAT Act.
Sd/-
(R.K. VERMA)
Commissioner, VAT
F1(45)/VAT/Policy/2005-06 Dated: 12-05-05
Copy for immediate and follow-up action:
1. PS to Commissioner, VAT.
2. PA to Addl. Commissioners I,II, III & IV.
3. All Joint Commissioners/Dy. Commissioners.
4. All Assessing Authorities/VAT Officers/Asstt. VAT Officers.
5. VAT Officers, Tax Payer Service, Dispute Settlement Unit, Key Dealer Unit, Coordination, Audit, Enforcement .
6. Manager (EDP) with the request to make arrangement for circulation on web site.
7. President, Value Added Tax Bar Association, New Delhi.
8. All Trade Associations.
9. Guard file.
Sd/-
(S.S. Ghonkrokta)
Jt. Commissioner, VAT
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