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05.07.2016 - Voice of CA presents - Updates
Tuesday, July 5, 2016

I. A Valuable Presentation:

1.  The Income Declaration Scheme, 2016

(Please click here for detail)   

(Contribution by CA. Sanjay K. Agarwal, Founder - Voice of CA and contributor is available at eMail-id:


II. Headlines Today    

  1. Project Insight to give tax officials more teeth  (Click for detail)
  2. Tax officials get 60-day cap to resolve grievances  (Click for detail)
  3. SC seeks status report from ICAI over allegations of FDI violations by audit firms  (Click for detail)
  4. Salary Reporting Norms Eased for India Inc  (Click for detail)
  5. Press Release: Indo - Cyprus Double Taxation Avoidance Agreement  (Click for detail)
III.  Direct Taxes Case Laws: 

1.  Indian Railway Const. Co. Ltd. Vs. IAC (A), I.T.A. No. 2144/Del/1989, Date of Judgment: 01.07.2016, ITAT - Delhi


Whether a construction company also involved in ancillary manufacturing activity can claim deduction under section 80-HH and 80-I of the Income Tax Act, 1961?

Held: Yes, but only in respect of the gross profit earned through manufacturing activity.

Brief Facts:
The assessee, an industrial undertaking, was engaged in construction of railway tracks and in the manufacturing of large number of items including ballast, concrete sleepers, specialized mechanical track laying/relaying equipment, railway panels, etc., all of which were used in the fabrication and installation of railway tracks.

The assessee had been allowed deductions u/s 80HH and 80-I in the initial two years. However, for the relevant AY, the revenue authorities disallowed the assessee's claim for deduction under those sections on ground that execution of the project of railway track would not amount to production of goods/articles. On appeal, the Tribunal set aside impugned orders and restored the matter to the Assessing Officer. On the revenue's appeal to the High Court, the assessee contended that if a decision had been taken, either at the assessment stage or at the appellate stage, in the first relevant AY to grant the benefits u/s 80HH and 80-I to it, then said benefits could not be withheld in the subsequent years on the ground that the decision taken in the first year was erroneous, or that the assessee was, for some reason, not eligible for the benefits u/s 80HH and 80-I. The revenue, on the other hand, submitted that the order passed by the AO  in the first AY 1982-83 could not be allowed to be repeated as in the meantime the Supreme Court in the case of CIT v. N.C. Budharaja & Co. [1993] 204 ITR 412 held that such a benefit/deduction was not allowable.

The Hon’ble Delhi High Court in assessee’s case [2009] 226 CTR 49 (Delhi) observed that the issue of allowability of deduction u/s 80HH of the Act was left open by the Hon’ble Supreme Court in the case of N.C. Budhiraja (supra) hence the Hon’ble High Court explicitly held that the case of the assessee was not examined by the Tribunal from this angle at all and ordered for re-examination.

Held: Based on the definitions of ‘manufacture’, ‘production’ and ‘articles’ provided by the Hon’ble Supreme Court in N.C. Budhiraja (supra) and provisions of section 80HH which provides for "deductions to be made in computing total income", held that the assessee is entitled for deduction u/s 80HH and 80I of the Act on the part of income earned from manufacturing activities and the AO was directed for limited purpose to calculate the quantum of deduction u/s 80HH for all the five AYs under consideration.

(Please click here for judgment)


2.  Green Acres Educational Trust Vs. DCIT, I.T.A. No. 412/Mum/2013, Date of Order: 24.06.2016, ITAT - Mumbai

Whether pre-schooling falls within the scope of ‘Education’ as per section 2(15) of the Income Tax Act,1961 and Whether charging of fees and retaining surplus amounts to commercial activity disentitling assessee from the benefit of exemption u/s 11 and 12 of the Act?

Held- No

Brief Facts
The assessee is a trust constituted with the object of imparting high quality education to students of all castes, creeds and communities by way of setting-up schools, colleges, and educational and vocational training institutes in India. The assessee trust filed  application u/s 12A of the Act which was rejected by the Ld. DIT contending that the assessee is running a pre-school which is a stage prior to normal schooling, and therefore cannot be treated as ‘Education’ u/s 2(15) of the Act. Also, the assessee is charging fees on account of supply of School kit, prospectus, admission fees etc. and should be considered as commercial activity not as charitable one. In this regard, the Ld. Counsel for assessee contended that the Ld. DIT has ignored the object mentioned in the trust of imparting high quality education and the pre-school is just one of the activities. Further, with regard to the second reason given by Ld. DIT, it was submitted that the assessee is required to maintain appropriate infrastructure & establishment as well as arrangement of competent faculties so as to provide good quality of education for the students and therefore, incurred a deficit during the period. It was also contented by the Ld. AR the all the facts should be seen in totality and not in isolation.

The Hon’ble ITAT held that the contention of the Ld. DIT is not only contrary to law and facts, but also highly myopic and regressive. It is not necessary that there should be holding of regular classes or wholesome educational activities to be called educational activities eligible for benefits u/s 11 & 12 of the Act. The term “education” is of wide scope and amplitude. It was further observed that it is not necessary for the purpose of getting the benefit of exemption u/s 11 and 12, that assessee must carry out all its activities free of cost i.e. without charging anything from anyone. As per section 2(15), the term ‘charitable purpose’ includes education. The intention of the legislature is unambiguously clear that carrying out the activity of education itself is charitable. Thus, the appeal filed by the assessee is allowed.

(Please click here for judgment)      

IV. A Useful Video:

1.  Video on key highlights of Draft Model GST Law

(Please click here for detail)

(Please click here for video)

(Contribution by CA. Bimal Jain and contributor is available at eMail-id:

 Golden Rules:

  "It's very easy to give an example,
but it's very difficult to become an example"


  Thanks & Regards


Voice of CA 

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