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05.09.2016 - Voice of CA presents - Updates
Monday, September 5, 2016

I. Headlines Today    

  1. IDS: CBDT clarifies that no enquiry or investigation in respect of assets declared found during the course of Search u/s 132  (Click for detail)
  2. Govt. grants service tax exemption on spectrum license fee paid by Telecos prior to Aril 1, 2016  (Click for detail)
  3. Start maintaining a personal balance sheet  (Click for detail)
  4. New date for Budget only after Acharya panel inputs  (Click for detail)
  5. Insurers will have to deal with more taxes in GST regime  (Click for detail)
II.  Direct Taxes Case Laws: 

1.   CIT Vs. Knight Frank (India) Pvt. Ltd., I.T.A. No. 247 & 255 of 2014, Date of Order: 16.08.2016, High Court of Bombay

Whether Section 145A of the Income Tax Act, 1961 is applicable only to valuation of purchase and sale of goods/inventory and not on service rendered on which  service tax is payable?


Brief Facts:
The assessee is engaged in the business of real estate consultancy/agency and property management services. During the assessment, the AO included the service tax for rendering services as trading receipts by invoking Section 145A(ii) of the Income Tax Act, 1961. The assessee contended that the Section 145(a)(ii) does not include service tax. On appeal to CIT(A), the additions u/s 145(a)(ii) and 43B were upheld on the grounds that the applicability of the section 145 (a)(ii) is not restricted only to manufacturing and trading companies. Moreover, service tax stands on the same footing as excise duties, sales tax and other taxes, which are collected to be paid over to the Government. On another appeal to the Tribunal, it was held that Section 145(a)(ii) would not be applicable to the service tax. Similarly, as no deduction was claimed u/s 43B, the addition made by the AO was deleted. Aggrieved by which, the revenue appealed before the High Court.

It was held that from the reading of Section 145A(a)(ii) that it only covers cases where the amount of tax, duty, cess or fee is actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. Since, the assessee has not incurred any liability for the purpose of bringing any goods to the place of location; therefore, the said section is not applicable in the present case. The Rendering of service is not goods or inventory. Goods would mean movables and inventory would mean stock of goods. Section specifically restricts its ambit only to valuation of purchase and sale of goods and inventory. Therefore, the Explanation to the Section does not widen the scope of tax and only clarifies the ambiguity. Hence, the appeal of the revenue is dismissed.

(Please click here for judgment)

2.  Shri Raj Dutta Vs. JCIT, I.T.A. No. 930/Del./2012, Date of Judgment: 12.08.2016, ITAT - Delhi

Whether the factum of not declaring the STCG allegedly due to bonafide mistake/clerical error amounts to concealment of income so as to attract the penalty u/s 271(1)(c) of the Act?


Brief Facts:
The assessee a CEO of an MNC, being a salaried tax payer deposited income-tax to the tune of Rs.26,00,000/-, on total income at Rs.75,46,850/-, the assessment was completed under section 143 (3) of the Income-tax Act, 1961 vide order dated 29.12.2008 at Rs.94,01,360/- and penalty proceedings u/s 271(1)(c) of the Act initiated for the reason that the assessee has not declared STCG (STT not paid) amounting to Rs.18,54,504/- which was subsequently offered for taxation.

Assessee during the penalty proceedings took the plea that due to bonafide mistake on the part of the Chartered Accountant, STCG could not be counted correctly leaving behind a difference of Rs.6,00,000/- in tax; the CA had already furnished the affidavit as to the mistake committed by him. However, AO, by invoking Explanation 1 to Sec. 271(1)(c) of the Act, did not accept the plea of the assessee and imposed the penalty. The Ld. CIT(A) also affirmed the penalty order by dismissing the appeal. The ld. DR contended that such a mistake cannot be bonafide on part of the assessee who is working as CEO of an MNC and relied upon the order passed by AO/ CIT(A).

The explanation offered by the assessee is found to be not sustainable by AO as well as CIT(A) on the sole ground that such a mistake cannot be bonafide as the assessee is a CEO of an MNC which is not sustainable. Also the assessee has made investment in numerous mutual funds of which he has furnished statement of STCG before the ld. CIT (A) showing computation of capital gain to the tune of Rs.37,48,819/- whereas the same were required to be Rs.56,07,323/-, such a computation cannot be considered as false rather just a result of a bonafide mistake. The contention of the ld. DR that if this case was not subjected to scrutiny the assessee would have evaded the tax is not sustainable because mere filing of the return of income by the assessee is not to be treated by the revenue as a gospel truth and it has to be examined by the expert taxman or to be put to the scrutiny. In view of the above, it was held that penalty order affirmed by Ld. CIT(A) is not sustainable.

(Please click here for judgment)

III. Useful Articles:

1.  Supply- Taxable Event under Model GST Law -Inclusive and Subjective 

(Please click here for detail)

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


 Golden Rules:

  "Confidence doesn’t come when you have all the answers.
But it comes when you are ready to face all the questions"


  Thanks & Regards


Voice of CA 

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