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09.07.2018 - Voice of CA presents - Latest Updates
Monday, July 9, 2018

  I. Headlines Today:   

  1. MCA amends Companies (Authorized to Register) Rules, 2014  (Click for detail)
  2. MCA amends Deposit Rules; Certificate from auditor to be attached in Form DPT-1  (Click for detail)
  3. MCA Notification: 300 days instead of 30 days for intimation related to satisfaction of charge  (Click for detail)
  4. MCA issues KYC norms for directors  (Click for detail)
  5. MCA imposes penalty of Rs. 5,000 on directors if they fail to file their e-KYC on or before due date  (Click for detail)
  6. MCA enforces provisions related to deposit and satisfaction of charges  (Click for detail)
  7. UBI expects Rs 3,000 crore recovery from NCLT resolutions  (Click for detail)
  8. Tax on liquor production input: AAR puts ball in GST Council's court  (Click for detail)
  II. Direct Taxes Case Laws: 

1.  DCIT Vs. M/s Tata Tele Services, I.T.A. No.3857/Mum/2016, Date of Pronouncement: 08.06.2018, ITAT - Mumbai

Whether the discount given by the assessee on sale of prepaid starter kits/sim cards to the distributors would be liable for deduction of tax at source u/s 194H of the Act?

Held: No

Brief facts
The assessee company which is a telecom operator had e-filed its return of income for A.Y 2011-12 declaring a loss, which was processed as such under Sec.143 (1) of the Act. The case of the assessee was there after taken up for scrutiny assessment. During the course of assessment proceedings, the AO observed that the assessee had extended discounts to its prepaid distributors for selling of its prepaid recharge vouchers and starter kits, but no TDS was deducted on the said discounts. The AO being of the view that as the discount on sale of SIM/RCV were in the nature of commission, hence the assessee was liable to deduct tax at source on the same under Sec.194H of the Act.

The assessee contended that as its relation with the distributors was on a principal-to-principal basis, thus the discount given to the distributors constituted the latter’s margin and could not be held to be commission or brokerage liable for deduction of tax at source u/s 194H.The A.O disallowed the amount u/s 40(a)(ia). Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) after deliberating on the contentions advanced by the assessee in the backdrop of the facts of the case observed, that his predecessor while disposing off the appeals in the case of the assessee for the immediately preceding years i.e. A.Y 2009-10 and A.Y 2010-11 had deleted similar disallowances made by the A.O u/s 40(a)(ia) by relying on the judgment of the High Court of Karnataka in the case of Bharti Airtel Ltd.Vs. DCIT[2015] 372 ITR 33. The CIT(A), therefore, deleted the addition/disallowance made by the A.O. The revenue being aggrieved with the order of the CIT(A) had carried the matter in appeal before ITAT.

The Hon’ble ITAT by placing reliance on judgement of Hon’ble High Court of Karnataka in Bharti Airtel Ltd. Vs. DCIT [2015] 372 ITR 33 had concluded that the assessee remained under no obligation to deduct tax at source on the said discounts,thus it could not be held as being in default under Sec. 201(1) and 201(1A)of the Act. The sale of starter kits/sim cards is purely a purchase/sale transaction on principal-to-principal basis and there is no relationship of agency, hence no obligation was cast upon the assessee to have deducted tax at source under Sec. 194H in respect of the discounts given to the distributors on the sale of the same. Thus,in the absence of any obligation castupon the assessee to have deducted tax at source in respect of the discounts given to the distributors on the sale of the prepaid starter kits/sim cards, no disallowance under Sec.40(a)(ia) was called for in the hands of the assessee. Thus, there is no infirmity with the order of the CIT(A), uphold the same.The appeal filed by the revenue is dismissed.

Case referred:
1.    Bharti Airtel Ltd. Vs. DCIT[2015] 372 ITR 33 (Karnataka)

(Please click here for judgment)

2. ITO (Exemptions) Vs. M/s Syndicate Rural Development Trust, I.T.A. No. 1342/Bang/2018, Date of Pronouncement: 15.06.2018, ITAT - Bangalore

Whether the learned CIT(A) is right in allowing exemptions u/s 11(1)(d) which was not claimed in the return of income?

Held: - Yes

Brief facts
The appellant is a trust registered under section 12AA and filed its return of income declaring a Nil income. During the year, appellant received Rs.50.00 lakh from National Institute of Rural Development, Government of India, as a part of grant of Rs.100 lakh for creating infrastructure for setting up of RSETI (Rural Self Employment Training Institute). The AO has made an addition of Rs.50.00 lakh to the return of income on the ground that the appellant did not claim the same as corpus fund under section 11(1)(d) of the Act. The AO also added the interest on the building fund which was reflected as receipt in receipts and payments account, but not included in the income and expenditure account. The assessee preferred an appeal before the CIT(A) and filed relevant evidence to demonstrate that the first instalment was given for creating infrastructure for setting up of RSETI at Gautam Buddh Nagar, Uttar Pradesh. He has also scanned the letter and the approval issued in this regard in its order and having examined the claim under section 11(1)(d) of the Act, the CIT(A) has deleted the additions relying upon the judgment of the jurisdictional High Court. Aggrieved, the Revenue preferred an appeal before the Tribunal.

The Hon’ble ITAT held that the submissions of the appellant and assessment order were carefully considered. It is undisputed that the appellant in the return made an error in not claiming the grant and the interest on it as corpus fund u/s.11(1)(d) or specific fund. But the intention of the appellant is reflected in its actions. The appellant received Rs.50 lakhs as grant from NIRD, Ministry of Rural Development for building fund as mentioned in the sanction letter and treated it as a separate fund in its books.The CIT(A) has adjudicated the issue in the light of evidence filed before it and the judgments of the jurisdictional High Court and no specific defect is found in the order and there is no infirmity in the order of the CIT(A). Therefore, the appeal was held against the revenue and in favour of assessee.

(Please click here for judgment)

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