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04.02.2017 - Voice of CA presents - Updates
Saturday, February 4, 2017

I. Headlines Today    

  1. Cap on online transaction service fee likely  (click for detail)
  2. Electoral bonds will have to be redeemed within days: FM Arun Jaitley  (click for detail)
  3. Genuine taxpayers need not worry about deposits in note ban, assures revenue secretary Hasmukh Adhia  (click for detail)
  4. FM Arun Jaitley defends surcharge levy, says rich must pay more  (click for detail)
  5. FEMA Circular: Foreign Exchange Management Act, 1999 (FEMA) Foreign Exchange (Compounding Proceedings) Rules, 2000 (the Rules) - Compounding of Contraventions under FEMA, 1999  (click for detail)
  6. Here’s how you can save more income tax after the announcement made by FM in the current Budget  (click for detail)
II.  Direct Taxes Case Laws: 

1.  M/s Aarti Projects and Constructions Vs. DCIT, I.T.A. No. 4190/Mum/2016, Date of Order: 05.01.2017, ITAT - Mumbai

Whether the profits realised from the sale of the Floor Space Index (FSI) awarded as consideration for the construction activities, qualify for deduction u/s. 80-IB(10) of the Act?

Held: Yes

Brief facts:
During the year under consideration, the assessee undertook construction of tenements under Slum Rehabilitation Scheme of Maharashtra for which consideration was paid in the form of FSI. The FSI thus awarded as consideration for the construction activities undertaken under the said Scheme could either be utilized for construction of sale buildings on situ (on the same plot), or sold in open market as such, or in the form of TDRs. During the year the assessee had claimed deduction u/s, 80-IB(10) of the act which was arrived at after reducing the cost involved in the construction of rehabilitation buildings from the consideration received for the FSI granted by the State and which was sold to third parties as permitted under the said scheme.

However, AO declined assessee’s claim of deduction on the plea that the profit claimed as deduction was not derived from the housing project but from sale of unutilized FSI. AO further observed that since the FSI sold formed part of the project under development, the project could not be said to be completed. Moreover, AO objected that FSI sold to each of the person was in excess of 1000 sq.ft & that the FSI sold was at inflated rates to associated parties. and, therefore, deduction u/s. 80-IB(10) of the Act was not allowable. CIT(A) confirmed the action of the AO.

The tribunal held that consideration received for sale of unutilized FSI is eligible for claim of deduction u/s.80IB(10). The provisions of S. 80-IB(10) of the Act did not mandate that for the purpose of availing the benefit, the assessee should construct the tenements on the strength of the FSI received as consideration, however the assessee has a liberty to sell them off for monetary value and then find out the profit so as to make it 'derived from' the housing project.

Now coming to the objections of the AO to the effect that FSI sold to each of the person was in excess of 1000 sq.ft was misconceived as this limitation is for the constructed tenements and not for sale of FSI. Also, none of the parties was closely associated with the assessee, as assumed by AO and with regards to the observation that FSI sold was at inflated rates, it was found that all the sales were at ‘arm’s length’. Hence, such profits are eligible for deduction u/s.80IB(10).
Therefore, the appeal of the assessee is allowed.

(Please click here for judgment)


2.  Chander Bhan Vs. ITO, I.T.A .No. 1895/Del/2016, Date of Order: 01.02.2017, ITAT - Delhi

Whether onus to prove that notice u/s 148 of the Income Tax Act, 1961 is served to assessee is on Assessing officer not on Assessee?

Held: Yes, the burden to prove that notice was issued in accordance with law is on the authority.  

Brief of facts:
The assessee had deposited an amount of Rs.20 lakhs in cash on various dates in Saving Bank Account Number. 02501000071202 OF the HDFC Bank Ltd, Rewari in the year under consideration.  Accordingly, as per the assessment order, notice u/s 148 of the Income Tax Act, 1961 was issued to the assessee after recording of reasons on 16.03.2012. In response, thereto, the assessee filed its return of income on 18.02.2013 declaring a total income of Rs.4,426/-. After issuance of notices under section 143(2)/142(1) along with questionnaire etc. rejecting the explanation offered the assessment was concluded at an income of Rs.25,50,000/-. The Assessee challenged the jurisdiction of ld. AO to pass the order before CIT(A). The said ground of appeal was submitted, accordingly dismissed requiring the assessee to produce negative evidence. Being aggrieved by that assessee preferred an appeal before ITAT.

The Hon’ble ITAT held that the conclusion drawn by the CIT(A) on facts cannot be upheld. The factum of issuance of notice within time is to be proved on query by the authority whose jurisdiction is challenged for want of notice.  The aggrieved party cannot be asked to lead negative evidence in support of its claim.  When service of notice is challenged by a party then the burden to prove that notice was issued in accordance with law is on the authority whose jurisdiction in the absence of notice is under challenge.  The dismissal of assessee’s ground requiring the assessee to produce evidence in support of its contention is beyond the cognizance of law. The impugned order accordingly in view of this blatant misconception which is against all common sense and logic, is set aside and the issue is restored back to the file of the CIT(Appeals) with a direction to first decide the jurisdictional issue on facts in accordance with law and thereafter to proceed to consider the issue on merits if so warranted on facts.
Therefore, the appeal of the assessee is allowed for statistical purposes.

(Please click here for judgment)


 Golden Rules:

  "Patience with family is love,
patience with others is respect,
patience with self is confidence
and patience with god is faith"


  Thanks & Regards


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