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05.02.2016 - Voice of CA presents - Updates
Friday, February 5, 2016

                         I. Headlines Today    

  1. CBDT Notification: Procedure, Formats and Standards for ensuring secured transmission of electronic communication  (Click for detail)
  2. GST may be delayed further as parties get poll ready  (Click for detail)
  3. RBI updates norms of Foreign Exchange Management Act  (Click for detail)
  4. RTGS service charges for members and customers  (Click for detail)
  5. Announcement regarding Manner of Signing of Certificates by Chartered Accountants  (Click for detail)
II.  Direct Taxes Case Laws: 

1.  CIT & ACIT Vs. Karnataka Vikas Grameen Bank, I.T.A. No. 100014/2014 c/w ITA100013/2014, Date of Judgment: 14.12.2015, Karnataka High Court

Whether the addition can be made u/s 41(1) of the Income Tax Act, 1961 towards unclaimed ‘stale draft and pay orders’ in the hands of a Regional Rural Bank?

Held: No

The assessee is a Regional Rural Bank registered under the schedule of Reserve Bank of India (RBI). The assessee had ‘stale draft and pay orders’ for the reason that purchasers of DD/ Pay Orders had not claimed or encashed them. The AO considered the same as profits chargeable to tax u/s 41(1) of the Act.

The hon’ble High Court held that section 41(1) of the Act can be invoked when an allowance or deduction is sought to be made in respect of loss, expenditure or trading liability is incurred by the assessee. In the present case, the amount was with assessee because of the fact that the payee or the holders of drafts/ pay orders had not encashed them and the same was liable to be discharged as and when a claim is lodged by the holder/ payee of a draft/ pay order. The provision is clear and unambiguous and it would be incongruous to construe that the amount involved as either a loss, expenditure or trading liability incurred by the assessee. The reliance was placed on CIT vs T.V. Sundaram Iyenagar & Sons Limited (1996) 222 ITR 344 (SC) wherein it was held that amount remaining un-claimed by various trading parties for a long time and written back to the P&L a/c, is of capital nature thereby not attracting the provisions of Section 41(1).

(Please click here for judgment)

2.  Safina Hotels Pvt. Ltd. Vs. CIT & DCIT, I.T.A. No. 240/2010, Date of Judgment: 25.01.2016, Karnataka High Court

Whether penalty can be levied u/s 271(1)(c) of the Income Tax Act, 1961 where notice was issued u/s 271(1)(b) of the Act?

Held: No

The assessee was engaged in the business of hotel industry. The assessee had claimed loss on sale of investment under ‘financial charges’. The AO disallowed the amount contending the same as capital in nature and initiated separate penalty proceedings u/s 271(1)(c) of the Act for willful concealment of the income and for furnishing inaccurate particulars of such income. However, the notice issued u/s 274 r.w.s 271, corresponded to Section 271(1)(b) of the Act, and the order of AO was passed u/s 271(1)(c) of the Act.

The hon’ble High Court held that the AO had no jurisdiction to pass the penalty order u/s 271(1)(c ) of the Act without issuing a proper notice as required under law and when the particulars are disclosed in the return of income. The hon’ble Court placed reliance on Judgement of ‘Manjunath Cotton and Ginnings (2013) 359 ITR 565’ (Kar). Also held that, direction to initiate penalty proceedings in assessment order, as required u/s 271(1B) of the Act should be clear and unambiguous.

(Please click here for judgment)  

III. Useful Updates on ST: 

1.  Rebate/refund of SB Cess on exports & services used in SEZ; Cenvat credit cannot be used for SB Cess & others 

(Please click here for detail)

2.  Some important Judgements of Service Tax

(Please click here for detail)  

[Contribution by CA. Bimal Jain; contributor is available at eMail:]


IV. Useful Update on IDT: 

“Latest Judicial Precedents under Indirect Taxation” 

(Please click here for detail)

[Contribution by CA. Ashish Chaudhary and contributor is available at eMail:]


 Golden Rules:

  "A normal person prays,
don't give me problems.
But a great person prays
give me power to face problems"


  Thanks & Regards


Voice of CA 

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