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27.03.2020 - Voice of CA presents - Useful Updates
Friday, March 27, 2020

  I. Headlines Today:   

  1. Press Release: Measures announced by Finance Minister on Statutory and Regulatory compliance  (Click for detail)
  2. CBIC notifies due date of filing GSTR-1 for the period April to September, 2020  (Click for detail)
  3. CBIC notifies due date of filing GSTR-3B for the period April to September, 2020  (Click for detail)
  4. MCA extends due date of applicability of CARO-2020  (Click for detail)
  5. MCA hikes threshold limit for default value from Rs.1 lakh to Rs.1 crore under IBC  (Click for detail)
  6. Finance Minister announces Rs 1.70 Lakh Cr relief package  (Click for detail)
  7. SEBI allows top 100 firms to delay AGMs, extends deadlines of key meetings  (Click for detail)

II. Direct Taxes Case Laws: 

1.   Rajesh Rajkumar Nagpal Vs. ACIT, I.T.A. No. 261/Mum/2019, Date of Pronouncement: 16.03.2020, ITAT - Mumbai

Whether reimbursement of business expenditures covered under section 2(22)(e) of the Income Tax Act, 1961 as deemed dividend, Held: No

Brief Facts:
The assessee being resident individual was assessed for year under consideration u/s 143(3) on 28/11/2016 wherein it was saddled with addition of deemed dividend u/s 2(22)(e) for Rs.1.21 Lacs. The reason to make the stated addition was the fact that the assessee held 22% shares of an entity namely M/s Piem Hotels Ltd. (PHL) It was noted that payment of Rs.1.21 Lacs was made by the said entity for Citibank Credit Card held by the assessee. Therefore, it was alleged that the company was making some kind of advances to the assessee in the form of credit card balance, from which he was incurring the expenses. Accordingly, the said payment was treated as deemed dividend u/s 2(22)(e) and added to the income of the assessee.

Before learned CIT(A), the assessee submitted that the assessee was receiving salary and commission from M/s PHL. It was explained that most of the credit card expenses were paid for by the assessee himself from his own bank account except for certain items of expenses which were incurred by the assessee but paid by the said company. These expenses were incurred for and on account of the company and were on account of renewal of membership of the Entrepreneurs organization, USA, covering case for Apple Ipad provided by the company to the assessee for official use and Matrix Card for international roaming mobile expenses during foreign travel for professional work. Therefore, it was submitted that the provisions of Sec.2(22)(e) were not, at all, applicable. The Ld. CIT(A) agreed with the said submission but ultimately concluded that it would be personal expenses for assessee which is met by M/s PHL and therefore, the addition would have to be confirmed. Aggrieved, the assessee is under further appeal before us.

The Hon’ble ITAT held that the provisions of Sec.2(22)(e) were not applicable since the payment was mere reimbursement of expenditure by M/s PHL. However, Ld. CIT(A) proceeded on wrong footing that the same would be personal expenditure and hence, disallowable completely overlooking the fact that the said expenditure has never been claimed by the assessee anywhere while computing his income. The said expenditure was booked as business expenditure by M/s PHL. Therefore, the impugned additions could not be sustained.
Therefore, the appeal of the assesse stands allowed

(Please click here for judgment)

2.  DCIT Vs. Birla Nagar Jan Sewa Trust, I.T.A. No. 147/Agra/2017, Date of Pronouncement: 20.09.2019, ITAT - Agra

Wherein the payment has been made to the person covered under section 13(3) of the Income Tax Act, 1961 at reasonable rate, as remuneration for services rendered by him to trust, then the benefit of exemption u/s 11 of the Act cannot be denied,Held: Yes

Whether the reasonability of the payment would be check not only on the basis of degree of the person but also after considering the other comparable instances; such as seniority, competence, experience, qualification, expertise, etc., Held: Yes

Brief Facts:
The assessee is a charitable trust registered and is running medical institution (hospital) and also in the imparting of education. The assesses trust besides have registered u/s 12AA of the Act was also approved u/s 10(23C)(via) of the Act. The assessee had filed return of income declaring the NIL income for the AY 2012-13. However, the assessment was completed by the AO by assessing the income of the assessee to the tune of Rs.7,34,12,020/- by not allowing the exemption u/s 10(23C) (viia) viz-a-viz Section 11 of the Income Tax Act, 1961 while recording in the assessment order that the payments were made to the prohibit person u/s 13(3) of the Act at unreasonable rate. Feeling aggrieved by the order passed by the AO, the assessee filed an appeal before the CIT(A).The CIT(A) found the payment made by the assesse trust to the alleged persons as reasonable hence allowed the benefit of exemption under section 11 to the appellant. The Revenue feeling aggrieved by the decision filed the appeal before the ITAT.

The case of the AO in the present case is that the assessee has been making the payment to Doctors by way of salary and professional fees which is in excess of what may be reasonably paid for such services by the comparable doctors in the Gwalior and for that purposes the AO has brought on record the comparable instances of Doctors working in Gajraja Chikitsa Mahavidhyalay and Chirayu Medical College.

In this case, the Hon’ble ITAT held that the AO has brought on record the comparable instances of the Gajraja Chikitsa Mahavidhyalay and Chirayu Medical College on record but failed to bring on record expertise, qualification any other factors like seniority competence ,experience, qualification etc.It is expected from the AO to bring on record the comparable only after bringing on record the comparison between two doctors not only on the basis of the medical degree but also on the basis of expertise etc.
In the result, appeal filed by the Revenue is dismissed and the order passed by the ld. CIT(A) was sustained.

(Please click here for judgment)


III. Useful Articles:

1.  Gujarat HC allows Rebate of Excise Dutyto Petitionerin Cash instead of Cenvat Credit in post GST regime

     (Please click here)  

[ Contribution by CA. Bimal Jain and contributor is available at eMail-id: bimaljain@ ]


Golden Rules:

  "Dark is not opposite of light,
it’s just the absence of light.
Similarly, a problem is the absence of an idea, not absence of a solution" 


Thanks & Regards


Voice of CA 

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