Introduction

S.14A was introduced to overcome the judgement of Supreme Court in Rajasthan State Warehousing Corporation v. CIT (2000) 242 ITR 450 (SC) wherein it was held that in case of an indivisible business, some income wherefrom is taxable while some exempt, entire expenditure would be permissible deduction and the principle of apportionment would apply only for an indivisible business. Finance Act, 2001 w.e.f. 01-04-1962 introduced the provision. Constitutional validity of the provision is upheld by the Bombay High Court in Goderj & Boyce Mfg Co Ltd v. CIT (2010) 328 ITR 81 (Bom) (HC) observing that Ruled 8D is applicable w.e.f. AY. 2008-09 and subsequent year and same is affirmed in Godrej & Boyce Manufacturing Co. Ltd v. DCIT (2017) 394 ITR 449(SC). Provision of S.14A read with Rule 8D has led to increase in litigation tremendously in the last one decade. To guide the professionals, we have made an attempt to prepare an issue wise list of case laws which may be useful for tax practitioners in their day to day practice.

Finance Bill 2001 (2001) 248 ITR 35 (St.) (45)

Finance Bill 2001 – Notes on clauses (2001) 248 ITR 116 (St.)

Finance Bill 2001 – Memo – Explaining Provision (2001) 248 ITR 195 (St.)

Finance Act, 2001 (Assent) (2001) 249 ITR 37 (St.)(47)

Circular No. 14 of 2001 – Explanatory Notes on provisions relating to direct taxes (2001) 252 ITR 65 (St) (86)

Rule 8D Working Circular NO. 5 / 2014  [F. NO. 225 / 182 / 2013-ITA.II], dt. 11-2-2014 (2014) 361 ITR 94 (St)

S.14A : Expenditure incurred in relation to income not includible in total income. [R.8D]

1. Recording of satisfaction :

1.1. Recording of satisfaction: When suo motu disallowances are shown by the assessee, without recording the satisfaction as to why the working shown by the assessee is not acceptable, disallowances cannot be made.

  • Maxopp Investment Ltd. v. CIT (2018) 402 ITR 640 / 164 DTR 1 /254 Taxman 325 (SC)

  • PCIT v. State Bank of Patiala (2018) 402 ITR 640 / 164 DTR 1 / 254 Taxman 325(SC)

    Editorial: Maxopp Investment Ltd v CIT (2012) 347 ITR 272 (Delhi) (HC) is affirmed. Decision of special Bench in ITO v. Daga Capital Management (2009) 312 ITR (AT) 1 (Mum.) (SB) is referred. Decision of SB is admitted vide order dt. 20.08.2018, is pending before Bombay High Court for final hearing ITA No. 989 of 2009.

  • Godrej & Boyce Manufacturing Co Ltd v. DCIT (2017) 394 ITR 449 /247 Taxman 361 / 151 DTR 89 / 295 CTR 121 (SC)

  • PCIT v. Bajaj Finance Ltd (2019) 178 DTR 219 / 309 CTR 28(Bom) (HC), www.itatonline.org

  • PCIT v. Vedanta Ltd. (2019) 261 Taxman 179 (Delhi) (HC)

  • PCIT v. Reliance Capital Asset Management Ltd (2017) 251 Taxman 68 / (2018) 400 ITR 217 (Bom) (HC)

    Editorial: SLP of revenue is dismissed, PCIT v. Reliance Capital Asset Management Ltd. (2018) 259 Taxman 83(SC)

  • H. T. Media Limited v. PCIT (2017) 399 ITR 576 / 156 DTR 250 / (2018) 300 CTR 34 (Delhi) (HC)

  • Punjab Tractors Ltd. v. CIT (2017) 393 ITR 223 / 246 Taxman 31 / 293 CTR 50 / 147 DTR 307 (P&H) (HC)

  • PCIT v. U. K. Paints (India) P. Ltd. (2017) 392 ITR 552 / 244 Taxman 309 / 153 DTR 201(Delhi) (HC)

  • CIT v. Kapsons Associates (2016) 381 ITR 204 (P&H) (HC)

  • CIT v. I. P. Support Services India (P) Ltd. (2015) 378 ITR 240 (Delhi) (HC)

  • CIT v. Om Prakash Khaitan (2015) 376 ITR 390 / 234 Taxman 813 / (2016) 138 DTR 197 /(2016) 288 CTR 378 (Delhi) (HC)

  • CIT v. Abhishek Industries Ltd. (2016) 380 ITR 652 / (2015) 231 Taxman 85 (P&H) (HC)

    Editorial: Granted special leave to the department (SLP (C) No. 28216 dated 28-9-2015) CIT v. Abhishek Industries Ltd. (2015) 378 ITR 34 (St) / 235 Taxman 510 (SC))

  • CIT v. Taikisha Engineering India Ltd. (2015) 370 ITR 338 /229 Taxman 143 / 275 CTR 316 / 114 DTR 316 (Delhi) (HC)

  • CIT v. Hero Management Service Ltd. (2014) 360 ITR 68 /220 Taxman 107 (Mag.) (Delhi.) (HC)

  • CIT v. REI Agro Ltd. (Cal.) (HC), www.itatonline.org

  • Unitech Ltd. v. DCIT (2019) 176 ITD 266 (Delhi) (Trib.)

  • ACIT v. Karnataka Bank Ltd.(2018) 63 ITR 433 (Bang.) (Trib.)

  • M. Junction Services Ltd. v. (2018) 65 ITR 40 (SN) (Kol) (Trib.)

  • Editorial : Followed, Maxopp Investment Ltd. v. CIT (2018) 402 ITR 640 (SC) need not maintain separate books of account .

  • IMC Ltd. v. Dy. CIT (2018) 191 TTJ 73 (Kol.) (Trib.)

  • DCIT v. Vantage Advertising P. LTD. (2018) 61 ITR 564 (Kol) (Trib.)

1.2. Recording of satisfaction – Mere assertion that section is applicable and that no expenditure had been incurred, was not acceptable without saying anything further, is not sufficient.

  • CIT v. U.P. Electronics Corporation Ltd.(2017) 397 ITR 113 (All) (HC)

  • Pradeep Khanna v. ACIT (Delhi) (HC), www.itatonline.org

  • Fereshte Sethna (Ms) v. ACIT(2017) 162 ITD 412 (Mum.) (Trib.)

1.3. Recording of satisfaction – Proximate cause between expenditure and exempt income is condition precedent for disallowance of expenditure. A proximate cause shall mean that the amount disallowed has a relationship with the exempt income.

  • CIT v. Walfort Share and Stock Brokers P. Ltd. (2010) 326 ITR 1 / 233 CTR 42 / 41 DTR 233 / 192 Taxman 211 (SC) Wallfort Shares & Stock Brokers Ltd. v. ITO (2005) 3 SOT 879 /96 ITD 1 / 96 TTJ 673 (SB) (Mum.) (Trib.)

Editorial: Affirmed in CIT v. Walfort Share & Stock Brokers (P) Ltd. (2010) 41 DTR 233 / 326 ITR 1 / 192Taxman 211 / 233 CTR 42 / (2010) 8 SCC 137 (SC)

CIT v. Walfort Share & Stock Brokers (P) Ltd. (2009) 310 ITR 421 (Bom) (HC)

1.4. Recording of satisfaction-The AO need not pay lip service and formally record dissatisfaction. It is sufficient if the order shows due application of mind to all aspects.

  • Indiabulls Financial Service Ltd. v. DCIT (2016) 395 ITR 242 (Delhi) (HC)

    Editorial: SLP of assessee is accepted; Indiabulls Financial Services Ltd. v. Dy CIT (2017) 247 Taxman 311 (SC)

  • Not expressly recording dissatisfaction does not render assessing officer’s reasons for disallowance invalid.

    Indiabulls Financial Services Ltd. v. Dy. CIT (2017) 395 ITR 242 (Delhi) (HC)

1.5. Recording of satisfaction by Appellate Authority – Satisfaction to be recorded by the Assessing Officer, it cannot be substituted by recorded satisfaction of Commissioner of Income tax (Appeals)

Arnav Gruh Ltd.v. DCIT (2018) 168 ITD 518(Mum.) (Trib.)

1.6 CIT (A) gave opportunity to the assessee and assessee has not demonstrated any mistake in the calculation hence disallowance was held to be justified.

GEBR Pfeiffer (I) (P.) Ltd. v. Addl. CIT (2014) 64 SOT 172 (URO) (Delhi) (Trib.)

1.7. Recording of satisfaction – Appellate Tribunal- Recording of satisfaction is mandatory, once this mandatory aspect was itself not fulfilled, the question of remanding the matter to the Commissioner (Appeals) and to call for a remand report from the Assessing Officer for the purposes of rectifying this jurisdictional defect would not arise.

Eicher Motors Ltd v. CIT (2017) 398 ITR 51 / 250 Taxman 532 (Delhi) (HC)

2. No exempt income – In the absence of any exempt income no disallowances can be made.

  • PCIT v. Oil Industries Development Board (2019) 262 Taxman 102 (SC), www.itatonline.org

    Editorial: PCIT v. Oil Industries Development Board (2019) 103 taxmann.com 325 (Delhi) (HC) is affirmed. (ITA No. 187 / 2018 dt.16-02-2018)

  • PCIT v. Caraf Builders and Constructions Pvt. Ltd.(2019)414 ITR 122 / 261 Taxman 47(Delhi) (HC)

  • PCIT v. McDonald’s India (P.) Ltd.[2019] 101 taxmann.com 86 (Del) (HC)

    Editorial: Referred Maxopp Investment Ltd v. CIT (2018) 402 ITR 640 (SC))

  • PCIT v. Vardhman Chemtech (P.) Ltd. (2019) 261 Taxman 233 / 179 DTR 35 (P&H) (HC)

  • CIT v. DLF Home Developers Ltd. (2019) 411 ITR 378 (Delhi) (HC)

  • CIT v. Goldman Sachs Services P. Ltd.(2018) 409 ITR 268 (Karn) (HC)

  • PCIT v. Ballapur Industries Ltd (ITA No. 51 of 2016, dt.13.10.2016) (Bom.) (HC), www.itatonline.org

  • PCIT v. IL & FS Energy Development Company Ltd. (2017) 399 ITR 483 / 250 Taxman 174 / 297 CTR 452 / 156 DTR 89(Delhi) (HC)

    Editorial. CBDT circular cannot override the provision.

  • CIT v. Chettinad Logistics (P.) Ltd. (2017) 248 Taxman 55 (Mad.) (HC)

    Editorial: SLP of revenue is dismissed; CIT v. Chettinad Logistics (P.) Ltd (2018) 257 Taxman 2 (SC)

  • Redington (India) Ltd v. Addl. CIT (2017) 392 ITR 633 / 77 taxman.com 257 (Mad.) (HC)

  • Cheminvest Ltd. v. CIT (2015) 378 ITR 33 /234 Taxman 761 / 126 DTR 289 / 281 CTR 447 (Delhi) (HC)

  • CIT v. Shivam Motors (P) Ltd. (2015) 230 Taxman 63 / 272 CTR 277 (All.) (HC)

  • CIT v. Corrtech Energy (P) Ltd. (2015) 372 ITR 97 / (2014) 272 CTR 262 / 223 Taxman 130 (Guj) (HC)

  • CIT v. Holcim India P. Ltd. (2014) 111 DTR 158 / 272 CTR 282 (Delhi) (HC)

  • CIT v. Lakhani Marketing Inc.(2014) 226 Taxman 45 (Mag.) / 272 CTR 265 /111 DTR 149 (P&H) (HC)

  • CIT v. Shivam Motors (P.) Ltd. (2014) 111 DTR 153 /272 CTR 277 / (2015) 230 Taxman 63 (All.) (HC)

  • ACIT v. Orissa Manganese & Minerals Ltd. (2019) 69 ITR 1((SN) (Kol.) (Trib.)

  • ACIT v. Sodexo Food Solutions India P. Ltd. (2019) 69 ITR 119 (Mum) ( Trib)

  • Jayneerinfrapower & Multiventures (P.) Ltd. v. DCIT (2019) 176 ITD 15 (Mum) (Trib.)

  • ACIT v. Janak Global Resources (P.) Ltd.(2019) 175 ITD 365 (Chd.)(Trib.)

  • DCIT v. Piramal Realty (P.) Ltd. (2019) 174 ITD 633 / 198 TTJ 999 / 176 DTR 242 (Mum) (Trib.)

  • DCIT v. Mc Fills Enterprise (P.) Ltd. (2019) 174 ITD 667 (Ahd) (Trib.)

  • ACITv. Gini & Jony Ltd. (2018) 172 ITD 472 /67 ITR 45 (SN) (2019) 197 TTJ 322 / 178 DTR 114 (Mum.) (Trib.)

  • ACIT v. Dish TV India Ltd. (2018) 194 TTJ 897 / 169 DTR 253(Mum.) (Trib.)

  • HLL Lifecare Limited v. ACIT (2018) 191 TTJ 1 (UO) /66 ITR 361 (Cochin) (Trib.)

  • Moonrock Hospitality P. Ltd. v. DCIT (2018) 61 ITR667 (Delhi) (Trib.)

  • ACIT v. Progressive Constructions Ltd (2018) 161 DTR 289 /63 ITR 516 / 191 TTJ 549 (SB) (Hyd) (Trib.)

  • ACIT v. Claridges Hotels Pvt. Ltd. (2018) 61 ITR135 (Delhi) (Trib.)

  • Cheminvest Ltd v. ITO (2009) 27 DTR 82 /124 TTJ 577 / 121 TTD 318 (SB) (Delhi) (Trib.)

    Editorial: Order of Tribunal is reversed by High Court in Chemivest Ltd v. CIT (2015) 378 ITR 13 (Delhi) (HC)

3. Disallowance u/s.14A cannot exceed exempt income.

  • PCIT v. Caraf Builders & Constructions (P.) Ltd. (2019) 261 Taxman 47 (Delhi) (HC)

  • PCIT v. State Bank of Patiala (2018) 99 taxmann.com 285 /259 Taxman 315 (P& H) (HC)

    Editorial: SLP of revenue is dismissed, PCIT v. State Bank of Patiala (2018) 259 Taxman 314 (SC)

  • Pragathi Krishna Gramin Bank. v. JCIT (2018) 256 Taxman 349 (Karn) (HC)

  • PCIT v. Empire Package Pvt. Ltd. (2016) 136 DTR 342 /286 CTR 457 (P&H) (HC)

  • Welspun India Ltd. v. Dy. CIT (2019) 69 ITR 617 (Mum) (Trib.)

  • Magic Share Traders Ltd. DCIT (2019) 174 ITD 230 (Ahd.) (Trib.)

  • Gold Seal Engineering Products P. Ltd. v. ACIT (2018) 66 ITR 37 (SN) (Mum.) (Trib.)

  • ACIT v. Satish Kumar Agarwal. (2018) 172 ITD 143 (Jaipur) (Trib.)

  • Future Corporate Resources Ltd. v. DCIT (2017) 167 ITD 33 (Mum)(Trib.)

4. Disallowance u/s. 14A cannot exceed exempt income – Alternative claim was raised before the Court was that disallowance cannot be in excess of total exempt income. As the alternative claim was not raised before the Tribunal the High Court declined to entertain the claim. Only issue of jurisdiction can be raised.

  • Ashish Estate & Properties (P.) Ltd. & CIT (2018) 257 Taxman 585 (Bom.) (HC)

5. Interest free funds – No disallowances can be made when there are sufficient interest free funds to make investment.

  • PCIT v. Premier Finance & Trading Co. Ltd.(2019)262 Taxman 341 (Bom) (HC)

  • CIT v. Gujarat State Fertilizers And Chemicals Ltd. (2018) 409 ITR 378 (Guj) (HC)

  • CIT v. Shreno Ltd. (2018) 409 ITR 401 / (2019)261 Taxman 239 (Guj) (HC)

    Editorial: Referred Maxopp Investment Ltd. v. CIT (2018) 402 ITR640 (SC)

  • CIT v. NHPC Ltd (2018) 408 ITR237 / 304 CTR 612 / 167 DTR 33 (P& H) (HC)

  • CIT v. Maruti Udyog Ltd. (2018) 407 ITR 159 (Delhi) (HC)

  • PCIT v. Rasoi Ltd. (2018) 407 ITR 126 (Cal) (HC)

  • CIT v. Deepak Vegpro (P) Ltd. (2018) 406 ITR 496 / 161 DTR 170 / 300 CTR 98 (Raj) (HC)

  • PCIT v. Nirma Credit & Capital (P.) Ltd (2017) 85 taxman. com 72 / (2018) 300 CTR 286 / 161 DTR 333 (Guj) (HC)

  • PCIT v. Sintex Industries Ltd. (2017) 248 Taxman 449 (Guj.) (HC)

    Editorial: SLP of revenue is dismissed PCIT v. Sintex Industries Ltd. (2018) 255 Taxman 171 (SC)

  • PCIT v. UTI Bank Ltd. (2017) 398 ITR 514 (Guj.) (HC)

  • PCIT v. Adani Enterprises Ltd. (2016) 241 Taxman 542 / (2017) 152 DTR 102 (Guj.) (HC)

  • CIT v. Nicholas Piramal (India) Ltd. (2016) 239 Taxman 470 (Bom.) (HC)

  • CIT v. Gujarat Industrial Development Corporation Ltd. (2013) 218 Taxman 142 (Guj.) (HC)

  • CIT v. UTI Bank Ltd. (2013) 215 Taxman 8 (Mag.) (Guj.) (HC)

  • CIT v. Microlabs Ltd. (2016) 383 ITR 490 (Karn.) (HC)

    Editorial: Order of Tribunal in Dy. CIT v. Microlabs Ltd. (2015) 39 ITR 585 (Bang.) (Trib), is confirmed

  • HDFC Bank Ltd. v. DCIT (2016) 383 ITR 529 /132 DTR 89 / 284 CTR 414 (Bom.) (HC)

    Editorial: Order of Tribunal in HDFC Bank v. Dy CIT (2015) 155 ITD 765 / 173 TTJ 810 / 130 DTR 21 (Mum.) (Trib.) is set aside.

  • CIT v. Karnataka State Industrial & Infrastructure Development Corpn. Ltd. (2016) 237 Taxman 240 /143 DTR 67 (Karn.) (HC)

  • CIT v. SBI DHFL Ltd. (2015) 376 ITR 296 /63 taxmann.com 345 (Bom.) (HC)

  • Addl. CIT v. Dhampur Sugar Mills (P) Ltd. (2015) 370 ITR 194 / 273 CTR 90 / 229 Taxman 271 (All.) (HC)

  • CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. (2014) 221 Taxman 479 (Guj) (HC)

  • CIT v. HDFC Bank Ltd. (2014) 366 ITR 505 /107 DTR 140 / 226 Taxman 132 (Mag.) / (2016) 284 CTR 409 (Bom) (HC)

  • CIT v. Torrent Power Ltd. (2014) 363 ITR 474 /222 Taxman 367 / 272 CTR 270 / 108 DTR 418 (Guj) (HC)

  • CIT v. Hitachi Home & Life Solutions (I.) Ltd. (2014) 221 Taxman 109 (Guj.) (HC)

  • DIT v. BNP Paribas SA (2013) 214 Taxman 548 (Bom.) (HC)

  • CIT v. Gujarat Power Corporation Ltd. (2013) 352 ITR 583 (Guj.) (HC)

  • DCIT v. Godawari Power & Ispat Ltd. (2018) 68 ITR 19 (SN) (Raipur)(Trib.)

Editorial: considering the huge investments, 2% of the dividend income should be disallowed towards administrative expenses.

6. Interest free funds – Decrease in interest free funds cannot be presumed that funds borrowed on interest were invested to earn exempt income. If even after the decrease the assessee has interest free funds sufficient to make the investment in assets yielding the exempt income, the presumption that it was such funds that were utilized for the said investment remains.

  • CIT v. Max India Ltd. (2017) 398 ITR 209 /295 CTR 448 / 151 DTR 220 (P&H) (HC)

  • DCIT (OSD) v. Voltamp Transformers Ltd. (2017) 59 ITR 101 (SN) (Ahd) (Trib)

  • Hi-Tech Engineers v. ITO (2017) 164 ITD 94 / 155 DTR 334 /188 TTJ 453 (Mum.) (Trib.)

  • DCIT v. Bombay Oxygen Corporation Ltd. (2017) 167 ITD 224 (Mum) (Trib.)

7. Interest free funds – Mixed funds – Interest expenditure relatable to investment in tax free funds was to be computed under provisions of Rule 8D(2) (ii).

  • Avon Cycles Ltd. v. CIT (2015) 228 Taxman 368 (Mag.) (P&H) (HC)

Editorial: SLP is granted, Avon Cycles Ltd. v. CIT (2015) 231 Taxman 226 (SC)

8. Interest free funds – Interest on borrowed funds that had been subject – matter of disallowance under section 36(1) (iii), could not be considered again for purpose of disallowance under section 14A.

  • ITO v. Snowtex Investment Ltd. (2015) 174 TTJ 875 /(2016) 129 DTR 203 (Kol.) (Trib.)

9. Interest free funds – Merger – Major part of shares were acquired by merger – it could not be said that assessee would have used loan fund – No disallowance of interest could be made.

  • CIT v. Cellice Developers (P.) Ltd. (2015) 231 Taxman 255 (Cal.) (HC)

10. Interest earned on NOSTRO account is taxable, hence no disallowance of interest expenditure u/s 14A.

  • DIT v. Credit Agricole Indo Suez (2015) 377 ITR 102 / 280 CTR 491 / 126 DTR 156 (Bom.) (HC)

11. Netting of interest – Benefit of netting to be allowed.

  • Dy. CIT v. UMIL Share & Stock Broking Services Ltd. (2018) 171 ITD 713 / 170 DTR 441 / 196 TTJ 91 (Kol.) (Trib.)

  • ITO v. Karnavati Petrochmem Pvt. Ltd. (Ahd.) (Trib.) www.itatonline.org.

    Investment which not yielded income cannot be considered – Investment which yielded income only be considered for computing the disallowance.

  • Welspun India Ltd. v. Dy. CIT (2019) 69 ITR 617 (Mum) (Trib.)

  • PTC India Ltd. v. DCIT (2019) 69 ITR 37(SN.) (Delhi) (Trib.)

  • ACIT v. Paras Buildtech (India) (P.) Ltd. (2018)62 ITR 284 (Delhi) (Trib.)

  • ACIT v. Vireet Investment Pvt. Ltd. (2017) 165 ITD 27 / 58 ITR 313 / 154 DTR 241 / 188 TTJ 1 (SB) (Delhi) (Trib.)

  • Dy.CIT v. Diamond Co. Ltd. (2017) 162 ITD 131 (Kol.) (Trib.)

  • Yashoda Health Care Services P. Ltd. v. DCIT (2017) 54 ITR 26 (Hyd.) (Trib.)

  • Electrosteel Castings Ltd. v. DCIT (2017) 53 ITR 5 (Kol.) (Trib.)

12. Stock in trade – Dividend received incidentally – Dominant intention not to be considered – Expenditure incurred for earning business profits will have to be apportioned and allowed as a deduction – Expenditure attributable to exempt dividend income will have to be appointed to be disallowed under section 14A.

  • Maxopp Investment Ltd. v. CIT (2018) 402 ITR 640 /164 DTR 1 / 254 Taxman 325(SC)

  • PCIT v. State Bank of Patiala (2018) 402 ITR 640 / 164 DTR 1 / 254 Taxman 325(SC)

Editorial: Maxopp Investment Ltd v CIT (2012) 347 ITR 272 (Delhi) (HC) is affirmed.

Decision of special Bench in ITO v. Daga Capital Management (2009) 312 ITR (AT) 1 (Mum.) (SB) is referred

13. Stock in trade or investment is irrelevant, disallowance was held to be justified.

  • Voltech Engineers (P.) Ltd. v. DCIT 163 ITD 469 (Chennai) (Trib.)

  • ITO v. Daga Capital Management (P) Ltd. (2008) 119 TTJ 289 /117 ITD 169 / 26 SOT 603 / 15 DTR 68 (SB) (Mum.) (Trib.)

    Editorial: Decision of SB is pending before Bombay High Court for final hearing ITA No. 989 of 2009.

  • D. H. Securities Pvt. Ltd. v. DCIT (2014) 146 ITD 1 / 99 DTR 298 / 160 TTJ 393 / 31 ITR 381 (TM) (Mum.) (Trib.)

14. Stock in trade – No disallowances can be made.

  • CIT v. GKK Capital Markets (P) Ltd. (2017) 392 ITR 196 /246 Taxman 52 / 293 CTR 323 / 147 DTR 330(Cal.) (HC)

  • PCIT v. State Bank of Patiala (2017) 391 ITR 218 / 245 Taxman 273 / 293 CTR 35 /147 DTR 290 (P&H) (HC)

  • CIT v. India Advantage Securities Ltd. (2016) 380 ITR 471 (Bom.) (HC)

    Editorial: Refer Dy. CIT v. India Advantages Securities Ltd. (Mum) (Trib.) itatonline.org

  • CCI Ltd. v. JCIT (2012) 206 Taxman 563 / 71 DTR 141 / 250 CTR 291 (Karn.) (HC)

  • Nice Bombay Transport (P.) Ltd. v. ACIT (OSD) (2019) 175 ITD 684 (Delhi) (Trib.) www.itatonline.org

    Editorial: Applying the ratio in Maxopp Investment Ltd v. CIT (2018) 402 ITR 640 (SC) the Tribunal held that no disallowances can be made in respect of dividend received from stock in trade.

  • Rajasthan State Industrial Development & Investment Corporation Ltd v. DCIT (2018) 195 TTJ 35 (Jaipur) (Trib.)

    Editorial: Own funds more than the investment no disallowances can be made.

  • UCO Bank v. Dy. CIT (2016) 49 ITR 34 (Kol.) (Trib.)

  • Fiduciary Shares & Stock (P.) Ltd. v. ACIT (2016) 159 ITD 554 /181 TTJ 750 (Mum.) (Trib.)

  • Paresh Pritamlal Mehta v. ITO (Pune) (Trib.); www.itatonline.org

  • Yes Bank Ltd. v. ACIT (2016) 46 ITR 317 (Mum.) (Trib.)

  • Dy. CIT v. Baljit Securities Private Limited (Kol.) (Trib.); www.itatonline.org

15. Securities held as stock in trade has to be considered for computing disallowance, however, the disallowance has to be computed by taking into consideration only those shares which have yielded dividend income in the year under consideration.

  • Kalyani Barter (P) Ltd. v. ITO (2017) 163 ITD 571 / 154 DTR 73 /187 TTJ 352 (Kol.) (Trib.)

  • Dy. CIT v. Teenlok Advisory Services (P.) Ltd. (2016) 159 ITD 991 (Kol.) (Trib.)

16. Strategic investments – Strategic investments or investments made for controlling interests with its group / associated companies is also to be considered for disallowance

  • Maxopp Investment Ltd. v. CIT (2018) 402 ITR 640 / 164 DTR 1 /254 Taxman 325 (SC)

  • PCIT v. State Bank of Patiala (2018) 402 ITR 640 / 164 DTR 1 / 254 Taxman 325 (SC)

  • Welspun India Ltd. v. Dy. CIT(2019)69 ITR 617 (Mum) (Trib.)

  • DCIT v. The Saraswat Co-operative Bank Limited (Mum.) (Trib); www.itatonline.org

  • Everplus Securities & Finance Ltd. v. Dy. CIT (2006) 102 TTJ 120 /101 ITD 151 (Delhi) (Trib.)

17. Object of assessee in making investment to gain holding controlling stake in group concerns and not for earning income – Provisions of section 14A cannot be invoked.

  • Dy. CIT v. Selvel Advertising P. Ltd. (2015) 37 ITR 611 (Kol.) (Trib.)

  • Interglobe Enterprises Ltd. v. Dy. CIT (2014) 40 CCH 22 (Delhi) (Trib.); www.itatonline.org

  • Garware Wall Ropes Ltd v. ACIT (2014) 65 SOT 86 (Mum.) (Trib.)

18. Investments in subsidiaries to be excluded while computing disallowance.

  • CIT v. Oriental Structural Engineers Pvt. Ltd. (2013) 35 taxmann.com210 /216 Taxman 92 (Mag.) (Delhi) (HC)

  • EIH Associated Hotels Ltd. v. Dy. CIT (Chennai) (Trib.) www.itatonline.org

  • JM Financial Ltd. v. ACIT (Mum.) (Trib.); www.itatonline.org.

19. Since Dividend from foreign subsidiaries are taxable in India, disallowance cannot be made

  • CIT v. Suzlon Energy Ltd. (2013) 215 Taxman 272 / 93 DTR 50 (Guj.) (HC)

    Editorial: Tribunal order in Suzlon Energy Ltd v. Dy. CIT 20 ITR 391(Ahd.) (Trib) is affirmed.

20. Investment in shares of foreign company – No disallowance can be made

  • ITO v. Strides Arcolab Ltd. (2012) 138 ITD 323 /(2013) 153 TTJ 181 / 85 DTR 128 (Mum.) (Trib.)

21. Short term gain – Since assessee is paying capital gains tax on short term investments, the provisions of Rule 8D will not apply on them.

  • Sundaram Asset Management Co. Ltd v. DCIT (2013) 145 ITD 17 (Chennai) (Trib.)

22. Administrative expenditure – Assessing Officer cannot attribute administrative expenses for earning tax free income in excess of total administrative expenditure.

  • PCIT v. Adani Agro (P) Ltd. (2018) 253 Taxman 507 (Guj.) (HC)

23. Estimation of expenditure – PSU bonds of NTPC – No specific relation of expenses to exempt income in orders of lower authorities – Disallowance was restricted to 1 percent of exempt income.

  • DCIT v. Growmore Leasing & Investment Ltd. (2018) 168 ITD 1 (Mum.) (Trib.)

24. Investment – Real dividend income alone is exempt and not Notional dividend – Difference between value of actual investment and value as on balance sheet is not dividend income – Hence S. 14A could not be invoked.

  • Apollo Sugar Clinics Ltd. v. DCIT (2019) 176 ITD 724 (Hyd.) (Trib.)

  • Mutual funds – Fixed terms debt scheme – Interest on over draft cannot be disallowed

Assessee having invested in the fixed maturity plans of various mutual funds which are basically fixed terms debt scheme, the same are not tax free investments and therefore the interest on the overdraft account could not be disallowed under the provisions of S. 14A of the Act.

Allen Career Institute v. JCIT (2017) 190 TTJ 823 / (2018) 161 DTR 25 (Jaipur.) (Trib.)

25. Disallowances shown in the return – Once Tribunal concluded that order passed in case of Reliance Utilities was binding on it then Tribunal could not fall back on alternative disallowance computed by assessee. Matter remanded to Tribunal for disposal a fresh.

  • Darashaw & Company (P.) Ltd. v. DCIT(2017) 251 Taxman 394 (Bom) (HC)

26. If disallowance falls below the amount of disallowance computed under section 14A offered by assessee in return of income, revenue cannot charge tax on income which never was income of assessee chargeable to tax. Assessed income can be less than the returned income.

  • Sajjan India Ltd v. ADIT (2018) 89 taxmann.com 21 (Mum) (Trib.)

27. Higher disallowance agreed before Assessing Officer during course of assessment. Assessee could not be bound by such offer. Restriction of disallowance was held to be justified.

  • CIT v. Everest Kento Cylinders Ltd. (2015) 378 ITR 57 /119 DTR 394 / 232 Taxman 307 / 277 CTR 511 (Bom.) (HC)

28. Disallowance only to extent of expenditure incurred by assessee in relation to tax exempt income – No reason for disallowance of sum voluntarily disallowed. Exempt income lower than disallowance.

  • Joint Investments P. Ltd. v. CIT (2015) 372 ITR 694 /233 Taxman 117 / 275 CTR 471 / 116 DTR 289 (Delhi) (HC)

Editorial: Order in Joint Investment P. Ltd. v. Asst. CIT [2014] 33 ITR 373 (Delhi) (Trib.) is set aside.

29. Disallowance cannot exceed the expenditure claimed.

  • ACIT v. Iqbal M. Chagala (2014) 34 ITR 636 / (2015) 67 SOT 123 (URO) (Mum.) (Trib.)

30. No expenditure incurred for earning exempt income, disallowances cannot be made.

  • CIT v. Max India Ltd. (No. 2) (2016) 388 ITR 81 / 75 taxmann.com 268 (P&H) (HC)

  • Pradeep Khanna v. ACIT (Delhi) (HC), www.itatonline.org

  • CIT v. Deepak Mittal (2013) 219 Taxman 314 / (2014) 361 ITR 131 (P&H) (HC)

  • CIT v. Amrit Sagar Mittal (2013) 219 Taxman 314 / (2014) 361 ITR 131 (P&H) (HC)

  • CIT v. Glenmark Pharmaceutical Ltd. (2013) 351 ITR 359 / 85 DTR 169 (Bom.) (HC)

  • CIT v. Reliance Industries Ltd. (2011) 339 ITR 632 (Bom.) (High Court)

  • CIT v. Hero Cycles Ltd. (2009) 31 DTR 301 / 233 CTR 74 / 323 ITR 518 / 189 Taxman 50 (P&H) (High Court)

31. Expenditure not connected with exempt income – Disallowance cannot be made

  • CIT v. Oriental Structural Engineers (P.) Ltd. (2013) 216 Taxman 92 (Mag) (Delhi) (HC)

32. Depreciation – The expression “expenditure” does not include allowances such as depreciation allowance. Accordingly, depreciation cannot be the subject matter of disallowance under section 14A (ratio of Nectar Beverages P. Ltd. v. Dy. CIT (2009) 314 ITR 314 (SC)followed);

Similarly, it was further held that the deduction under section 80D is not expenditure for earning tax-free income but is a permissible deduction from gross total income under Chapter VIA.

  • Hoshang D. Nanavati v. ACIT ITA No. 3567 / Mum / 07 dated 18-3-2011 (Mum.) (Trib.) Source: www.itatonline.org

33. Diminishing value of securities cannot be considered as expenditure for the purpose of disallowance.

  • ACIT v AF-taab Investment Company Ltd.(Mum) (Trib.) www.itatonline.org

34. Interest income from debentures is taxable hence such investments could not be considered for the purposes of disallowance of expenses towards exempt income.

  • Carpricon Reality Ltd. v. DCIT (2017) 165 ITD 249 / 156 DTR 219 / 188 TTJ 685 (Mum)(Trib.)

35. Interest expenditure attributable to a taxable business cannot be disallowed.

  • ACIT v. Dhampur Sugar Mill Pvt. Ltd. (2015) 370 ITR 194 /273 CTR 90 / 229 Taxman 271 / 111 DTR 350 (All.) (HC)

36. Share application money cannot be included while working average value of investment for the purpose of Rule 8D.

  • ITO v. LGW Ltd. (2016) 130 DTR 201 (Kol.) (Trib.) www.itatonline.org

37. Growth Mutual funds – Growth mutual funds does not yield any dividend / exempt income, therefore, the provisions of section 14A would not apply on the investment in Growth mutual funds. Disallowance for administrative expenses cannot exceed allocable expenditure debited to P&L account.

  • Manugraph India Ltd. v. DCIT (Mum.) (Trib.); www.itatonline.org

38. Interest on partner’s capital is not an expenditure amenable to S.14A and hence no disallowance can be made

  • Quality Industries v. JCIT (2016)161 ITD 217 / (2017) 183 TTJ 350/ /145 DTR 215(Pune) (Trib.)

39. Firm – Partner – Interest – Disallowance cannot be made if there is no tax-free income for the relevant year.

  • CIT v. Delite Enterprises (Bom.) (HC) www.itatonline.org

40. Income from firm – No disallowance can be made.

  • Hitesh D. Gajaria v. ACIT, ITA No. 993 / Mum / 2007, Bench – H, A.Y. 2003-04, dt. 14-11-2008 (2008) BCAJ p. 519, Vol. 40-B, Part 4, January 2009. (Mum.) (Trib.)

41. Interest paid to partners on capital contribution is not a statutory allowance under section 40(b) but is an expenditure under section 36(1) (iii) and, hence, liable for disallowance under section 14A.

  • ACIT v. Pahilajrai Jaikishin (2016) 157 ITD 1187 /179 TTJ 148 (Mum.) (Trib.)

42. Disallowance applies to partner’s share of profits – Depreciation is not “expenditure” & cannot be disallowed under section 14A

  • Vishnu Anant Mahajan v. ACIT (2012) 137 ITD 189 /16 ITR 621 / 72 DTR 217 / 147 TTJ 142 (SB) (Ahd.) (Trib.)

43. Share income from firm from which no interest was charged on advances made – Disallowance is justified.

  • CIT v. Popular Vehicles & Services Ltd. (2010) 325 ITR 523 /33 DTR 140 / 228 CTR 346 / 189 Taxman 14 (Ker.) (High Court)

44. Assessee is not to claim expenditure, including interest on borrowed amount invested in firm as capital, against income earned from a firm as share of profit in capacity of a partner of firm, since such income is exempt under section 10(2A)

  • Sudhir Dattaram Patil v. Dy. CIT (2005) 2 SOT 678 (Mum.) (Trib.)

45. Book profit – Disallowance has to be applied while computing book profits under clause (f) of Explanation to s.115JA. [S.115JA]

  • CIT v. Goetze (India) Ltd. (2014) 361 ITR 505 /97 DTR 169 (Delhi) (HC)

  • CIT v. Federal Mogul Goetage (India) Ltd. (2014)361 ITR 505 /97 DTR 169 (Delhi) (HC)

46. Book profit – The computation under clause (f) of Explanation 1 to section 115JB (2) is to be made without resorting to the computation as contemplated u / s 14A read with Rule 8D of the Income tax Rules 1962

  • ACIT v. Vireet Investment Pvt. Ltd. (2017) 165 ITD 27 /154 DTR 241 / 188 TTJ 1 (SB) (Delhi) (Trib.)

47. No disallowance under section 14A could be made against income which are entitled to deduction under section 80P(2) (d)

  • CIT v. Kribhco (2012) 349 ITR 618 /75 DTR 265 / 209 Taxman 252 / 252 CTR 374 (Delhi) (HC)

    Editorial:- Order of tribunal in ACIT v. Kribhco (2010) 6 ITR 686 (Delhi) (Trib.) is affirmed. SLP of revenue is dismissed (2013) 214 Taxman 24 (SC) (Mag.)

48. S. 14A is applicable to income claimed as deduction under S. 80P(2)(d) as well.

  • Punjab State Co-operative Milk Producers Federation Ltd. v. CIT (2016) 238 Taxman 207 (P&H) (HC)

49. Appellate authorities finding ten per cent of income earned could be apportioned towards expenses for earning dividend – Finding not perverse.

  • CIT v. India Advantage Securities Ltd. (2016) 380 ITR 471 (Bom.) (HC)

50. Directly credited by way of bank transfer – Disallowance of 2% of gross total income was not justified

  • Canara Bank v. ACIT (2014) 265 CTR 385 / (2015) 228 Taxman 212 / 99 DTR 36 (Karn.) (HC)

    Since incurring of certain administrative expenses cannot be ruled out – 2 per cent of exempt income was directed to be disallowed.

  • Super Auto Forge (P.) Ltd. v. ACIT (2016) 156 ITD 467 (Chennai) (Trib.)

51. The question of allocation of interest could arise only in a situation in which at least a part of borrowed funds are used in investments resulting in tax exempt income -Restricted to 0.5% of average value of investments resulting in tax exempt income.

  • UFO Movies India Ltd. v. ACIT (2016) 175 TTJ 633 /131 DTR 81 (Delhi) (Trib.)

52. Bifurcation of expenses –Proportionate disallowance is permissible

  • CIT v. Sintex Industries Ltd. (2013) 215 Taxman 148 (Mag.) (Guj.) (HC)

53. Non-maintenance of separate accounts – Disallowance of proportionate expenditure relating to tax-free income justified

  • Catholic Syrian Bank Ltd. v. ACIT (2012) 349 ITR 569 /251 CTR 40 / 74 DTR 19 (Ker.) (HC)

54. Arbitrary rejection-Explanation cannot be rejected arbitrarily

  • PCIT v. Hero Corporate Service Ltd. (2019) 103 taxmann.com 199 / 262 Taxman 30 (Delhi) (HC)

    Editorial: SLP of revenue is dismissed, PCIT v. Hero Corporate Service Ltd. (2019) 262 Taxman 29 / 103 taxmann.com 200(SC)

  • Inducto Steel Ltd. v. ACIT (2017) 165 ITD 405 /190 TTJ 582 / (2018) 161 DTR 136(Mum)(Trib.)

55. Investment in foreign subsidiary – Provisions of S.14A would not be applicable.

  • DCIT v. Helios and Matheson Information Technology Ltd. (2016) 46 ITR 172 (Chennai) (Trib.)

56. Provisions cannot extend to investments made in shares of foreign companies

  • ITO v. Strides Arcolab Ltd. (2012) 138 TD 323 / (2013) 85 DTR 128 (Mum.) (Trib.)

  • Suzlon Energy Ltd. v. Dy. CIT (2012) 20 ITR 391 /57 SOT 54 (URO) (Ahd.) (Trib.)

    Editorial: Affirmed by High Court in CIT v. Suzlon Energy Ltd (2013) 215 Taxman 272 / 93 DTR 50 (Guj.) (HC)

57. Investments to incorporate special purpose vehicles for road projects – Investments not for earning dividend income – Expenses and interest not to be disallowed.

  • L & T Infrastructure Development Projects Ltd. v. ITO (2015) 37 ITR 10 (Chennai) (Trib.)

    Editorial: Now this case law may be read in consonance with Maxopp where the dominant purpose if no more relevant.

58. Income exempt under section 50 of SIDBI Act, 1989, provisions of section 14A cannot be applied since it does not provide that such income of the SIDBI Bank will not be a part of the total income but only exempts from payment of income tax.

  • CIT v. Small Industries Development Bank of India (2012) 211 Taxman 341 / (2013) 85 DTR 436 (Bom.) (HC)

59. Key man insurance policy are taxable under section 28(vi) hence expenditure incurred relating to same cannot be disallowed under section 14A

  • Dy. CIT v. Noble Enclave & Towers (P) Ltd. (2012) 50 SOT 5 (Kol.) (Trib.)

60. Premium – Insurance policy – Income from Keyman Insurance Policy not having been included in the total income by dividend of section 10(10D) expenditure incurred by way of premium on this policy cannot be allowed as deduction in view of prohibition in section 14A.

  • Agarwal Packaging (P) Ltd. v. CIT (2007) 108 TTJ 787 /112 ITD 240 (Pune) (Trib.)

61. Shipping business -When income is computed as per provisions of Chapter XII – G disallowance under section 14A cannot be made [S. 115VP]

  • Varun Shipping Company Ltd. v. Addl. CIT (2012) 134 ITD 339 /66 DTR 390 / 144 TTJ 286 / 17 ITR 587 (Mum.) (Trib.)

62. Insurance business – S.14A is not applicable in the case of insurance business, which is governed by specific provisions of section 44.

  • Bajaj Alliance General insurance Co. Ltd. v. Addl. CIT (2010) 38 DTR 282 /130 TTJ 398 (Pune) (Trib.)

  • Oriental Insurance Co. Ltd. v. ACIT (2010) 38 DTR 273 /130 TTJ 388 (Delhi) (Trib.)

63. Double taxation avoidance agreement.

Dividend income earned from investment made in Oman is chargeable to tax in India under head ‘Income from other sources’ and would form part of total income; rebate of taxes had to be allowed from total taxes in terms of section 90(2), read with article 25 of Indo-Oman DTAA, and, consequently, provisions of S. 14A were not applicable to dividend received.

  • ACIT v. Indian Farmers Fertiliser Cooperative Ltd. (2018)171 ITD 504 (Delhi) (Trib.)

64. Revision-Disallowance has to be made even if the assessee has not earned any tax free income on the investment. Revision is held to be valid.

  • Lally Motors India (P) Ltd v. PCIT (2018) 170 ITD 370 / 93 taxmann. com 39 / 171 DTR 106 /195 TTJ 728 / 64 ITR 45 (SN) (Asr.) (Trib.) www.itatonline.org

Editorial : The aforementioned case law is to be read in lines with the judgment of PCIT v. Caraf Builders and Constructions Pvt. Ltd. and PCIT v. McDonald’s India (P.) Ltd.

65. Remand – In remand, disallowance under section 14A cannot exceed disallowance 
made in the original assessment order.

  • CIT v. Machino Plastic Ltd. (2012) 348 ITR 523 (Delhi) (HC)

66. Appellate Tribunal – Power – Applicability of provision of section 14A for the first time before Tribunal cannot be raised when the disallowance was made u/s 36(1) (iii) of the Act.

  • ACIT v. Delite Enterprises (P) Ltd. (2011) 135 TTJ 663 / 50 DTR 193 / 128 ITD 146 (Mum.) (Trib.)

67. Reassessment – Disallowance u/s 14A is held to be not valid

  • CIT v. P. G. Foils Ltd (2013) 356 ITR 594 (Guj.) (HC)

  • Reckitt Benckiser HealthCare India Ltd v. ACIT (2013) 216 Taxman 209 (Guj) (HC)

68. Concealment penalty – Disallowance u/s. 14A -Levy of penalty is held to be not valid.

  • CIT v Liquid Investment and Trading CO (ITA No. 240 / 2009 / dt.05-10-2010 (Delhi) (HC)

  • Skill Infrastructure v ACIT (2012) 139 ITD 25 / (2013) 157 TTJ 565 (Mum) (Trib.)

  • Sunash Investment Co Ltd v ACIT (2007) 14 SOT 80 / 106 TTJ 855 (Mum) (Trib.)

69. Applicable from AY 2008 -09 onwards – Provision is applicable only from the AY 2007 – 08 onwards; Rule 8D is prospective in nature.

  • CIT v. Essar Teleholdings Ltd (2018) 401 ITR 445 /162 DTR 225 / 300 CTR 561 / 253 Taxman 321 (SC)

    Editorial: CIT v. Firestone International P. LTD. (2015) 378 TR 558 (Bom.) (HC) and CIT v. Essar Teleholdings Ltd (Bom.) (HC) is affirmed.

  • Dhanalakshmi Bank Ltd. v. CIT (2019) 410 ITR 280 / 261 Taxman 521 / 177 DTR 48 / 308 CTR 484(Ker) (HC)

  • CIT v. Jammu Central Co-Op. Bank Ltd. (2018) 407 ITR 362 (J&K) (HC)

  • CIT v. Himatsingka Seide Ltd. (2016) 388 ITR 463 /240 Taxman 753 (Karn.) (HC)

  • Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT (2010) 328 ITR 81 /43 DTR 177 / 234 CTR 1 / 194 Taxman 203 (Bom.) / (2010) Vol. 112 (7) Bom. L.R. 3421 /(2011) 224 Taxation 330 (High Court)

  • Dy. CIT v. Philips Carbon Black Ltd. (2012) 146 TTJ 175 /70 DTR 267 (TM) (Kol.) (Trib.)

Articles :

  • S.14A: Essential Prerequisite For Invoking Section 14A: Satisfaction of AO- dt. 16. March 2019, Ashish Chadha CA.www.itatonline.org

  • S. 14A: Exempt Income Versus Expenses For Exempt Income- dt.19 April, 2018- Jyoti Gupta CA. www.itatonline.org

  • S.14A:An Analysis Of The Supreme Court’s Judgement In Maxopp Investment 402 ITR 640 On S. 14A / Rule 8D- 18 Oct.2018, Vipul B. Joshi, Adv. www.iatonline.org

  • S.14A: Supreme Court’s ruling in case of Maxopp Could have taxpayers shell out additional income-tax by Yogesh G. Shah (2018) 255 Taxman 11 (Mag.) (Article)

  • S.14A: Application of S.14A to investment companies: when unjustified? by S. Ganesh and R. S. Janani (2018) 253 Taxman 23 (Mag.)

  • S.14A: Rightly conceived but erroneous interpretations are proliferating litigation by T. N. Pandey (2018) 253Taxman 1 (Mag.)

  • S.14A: Section 14A & Rule 8D: Analysis Of Recent Important Judgements – dt. 31 May 2018- Ketan Ved CA. www.itatonline.org

  • S. 14A : Recording of reasons – Whether an empty formality under section 14A of the Income – tax Act, 1961 by Asim Choudhury (2017) 390 ITR 9 (Journal)

  • S. 14A : Special Bench Puts An End To The Controversy Of Applicability Of S. 14A Adjustment To Profit u / s 115JB by Jyoti Gupta, CA, www.itatonline.org

  • S. 14A : Exempt Income v. Expenses For Exempt Income by Jyoti Gupta, CA www.itatonline .org

  • S.14A : Scope Of Disallowance Explained by Dev Kumar Kothari, CA, www.itatonline.org

  • S.14A : No disallowance under section 14A, where the assessee has got no income from a composite and indivisible business, by S. K. Tyagi (2016) 384 ITR 1(Journal)

  • S.14A : Expenditure under Section 14A not disallowed if no exempt income received during the year by Vineet Sawheny (2016) 237 Taxman 1 (Mag.) (Articles)

  • S.14A :Tax exemption – A Boon turning in to Curse by Minu Agarwal (2015) 279 CTR 1 (Articles)

  • S.14A : Whether disallowance can be made by invoking provisions of section 14Aof the Act, even in those cases where no income has been earned by an assessee, which has been earned by assessee, which has been claimed as exempt during the financial year. By Kaushik D. Shah (2015) ACAJ – August – P. 297

  • S.14A : Disallowance under section 14A, in the light of the case of Deepak Mittal by S. K. Tyagi (2014) 361 ITR 1(Journal)

  • S.14A : Section 14A–Whether contemplates notional expenditure also by Mini Agarwal (2014) 266 CTR (Articles) 17

  • S.14A : Disallowance u / s. 14A cannot be added back to the “book profits” while computing MAT u/s. 115JB–Judicial analysis by Tushar Hemani (2014) ACAJ–September–P. 356

  • S.14A : Expenditure incurred for earning exempt income: Guide to law on section 14A by Dr. K. Shivaram Sr. Advocate and Rahul R. Sarda (2014) The Chamber’s Journal (2014) October–P. 61

  • S.14A: Disallowance under section 14A by S. K. Tyagi (2013) 358 ITR (Journal) 30

  • S.14A: Controversies-Section 14A, and its applicability to cases of stock in trade by Pradip Kapashi, Gautam Nayak (2013) BCAJ –March- P. 33

  • S.14A: Business expenditure-Applicability of section 14A to income covered by deductions under chapter VI-A by R. Raghunathan (2013) 255 CTR (Articles) 30.

  • S. 14A: Section 14A and Rule 8D by Sameer G. Dalal (2013) The Chamber’s Journal –June 31

  • S. 14A : Business expenditure – Delhi High Court’s Elucidation of section 14A of the Income-tax Act, 1961 By T. N. Pandey (2012) 246 CTR 57 (Articles)

  • S. 14A : Section 14A lack application vis-à-vis trade strategic Investments – Rule 8D must carry exceptions to be workable By Gopal Natahni (2012) 341 ITR 11 (Journal)

  • S. 14A : Business expenditure – Ready for dissection By Minu Agarwal (2012) 251 CTR 17 (Articles)

  • S. 14A : Assessing Officer cannot alter disallowance made under section 14A by the assessee unless there is some error in computation By V. K. Subramani (2012) 208 Taxman 266 (Mag.)

  • S. 14A : Business expenditure – Section 14A – Facing conceptual dilemma By Minu Agarwal (2012) 253 CTR 49 (Articles)

Dear Friends,

The New Income Tax Act is again a possibility in view of the recommendation submitted by the task force very recently to the Union Finance Minister wherein the task force has suggested a draft of New Income Tax Law which is said to be simplified and has been drafted with a view that there should be no ambiguity in it. It is said that it would have goods relief for the individual tax payer and also recommends reduction in corporate tax rate. Major changes in the concept of assessment and litigation management has been considered. The arbitration and mediation is said to be incorporated. There is said to be many other recommendations. The draft will be released shortly. It may be said that if the New Income Tax Act provides friendly features than it can be a new era in the taxation process in India.

It is really a great pride for all of us that the Zone Election for the year 2020 & 2021 has been completed of all Zones and it has been unanimous elections. All zone Chairmen have been elected for the year 2020 and it will give them at least five clear months to start and plan their working for the next term starting from 1st Jan., 2020.

Professionals are now busy in the filing of Annual Return and Audit of GST. The last date is 31st August, 2019. However, lots of problems are being faced and AIFTP has given representation on it to the CBIC and the Union Finance Minister. Representation has also been sent to GST Counsel for extension of date. Similar is the case for the non-audit Income Tax returns. The last date is 31st August, 2019 and it is suggested that we should get the work completed within time.

The next programme of AIFTP is the International Study Tour which is going to Eastern Europe with about 135 delegates. Thereafter, we have NTC and NEC at Varanasi. Requesting all the Members to attend the Varanasi meet in large number. The 22nd National Convention is at Mumbai on 14th and 15th December, 2019. Details have already been circulated. Please send your registration.

I wish you all a very happy Janamashthmi and Ganesh Chaturthi.

Yours faithfully,

Dr. Ashok Saraf
National President

 

New India vision – The Voice of the Professionals – The suggestions of the tax Bar for speedy disposal of matters and effective administration of justice

On the occasion of 72nd Independence day celebrations, Honourable Prime Minster of India Shri Narendra Modi addressed the occasion by putting forward a new India vision and road map to the Nation. It is the duty and obligation of the every citizen to support the vision of the Honourable Prime Minster. As tax consultants and tax payers of our country, we desire that in the new India Vision, the role of the judiciary cannot be left behind. We therefore make an appeal to the Honourable Prime Minster of India to consider the suggestion of the Tax Bar. As per a paper report there will be an annual conference of the Chief Justices and Chief Minsters at Delhi on 1st September, 2019 where the Honourable Prime Minster of India and the Honourable Chief justice of India will be sharing their vision for the future of the judiciary. We are making an appeal to consider the following issues to aid in the speedy disposal of matters before various judicial and quasi-judicial forums and the better administration of justice.

1. Linking of Supreme Court with all High Courts and hearing of Special Leave Petitions via E-Benches of the Apex Court

The All India Federation of Tax Practitioners have made various representations from time to time suggesting that the Honourable Supreme Court may constitute e-benches in the premises of various High Courts. The hearing of Special leave Petitions before the Apex Court can be done by linking the High courts with the Supreme Court thereby affording the litigants the facility for arguing matters before the Supreme Court from the respective High Courts. The E-bench of the Supreme Court may take up the matters on a High Court-wise basis, e.g. one day could be for matters of the Bombay High Court, another day from the Madras High Court and so on, in rotation for each High Court on a regular basis. Initially, an option may be given to the parties to hear the matters through an e-Bench or a regular Bench and upon the success of the pilot project, the said system can be adopted with suitable changes after consulting with all the stake holders.

The Income Tax Appellate Tribunal has started an e-Court at Mumbai through which the matters of Nagpur are heard by members sitting in Mumbai at the premises of the Mumbai Bench. The experience has been very satisfactory as per both, the tax payers as well as the Department. The e-Bench of Supreme Court could initially be started for the hearing of Special Leave Petitions (SLP) relating to direct and indirect tax matters. As per the concept, the litigants will be given an option to ‘opt in’ or ‘opt out’. If in case the litigants desire not to be heard by the e-Bench, they may take the option to opt out. The E-courts may be set up in the premises of all the High Courts around the Country. This will save precious time and reduce cost of litigation. In the era of digitalisation, if this suggestion is implemented, tax payers will get access to justice without the strenuous effort of travelling to Delhi.

2. Increase in the age limit of retirement for Judges of the High Court from 62 to 65 years

The Parliament has constituted a committee headed by Smt. Jayanti Natarajan as Chairperson for considering the increase in age limit of Judges of High Courts from 62 to 65. The Committee observed as under:-

Taking into account the justifications given by the secretary, Department of Justice, and the statement of objects and reasons appended to the bill, the committee supports the proposal for increase in the retirement age of judges of the High Courts from sixty two years to sixty five years and to be at par with the retirement age of the judges of the Supreme Court. The Committee also acknowledges that the Bill has been brought forth in pursuance of the recommendation made by the Committee in its earlier reports”

Though the committee has made the above recommendation on 7th December 2010, no steps have been taken for the implementation of the same till date. It is desirable that an appropriate decision may be taken at the earliest upon this issue. We are of the considered opinion that an increase in age limit will help in the increase of disposal of cases due to the greater availability of senior Judges due to which there could be a substantial reduction in pendency of cases.

3. Availing services of retired judges on a tenure basis of five years:

Article 224A of the Constitution of India enables the appointment of retired judges at sittings of High Courts as ad-hoc judges. As the pendency in the various high Courts is increasing, the services of ad-hoc judges may be availed for effective disposal of cases and efficient dispensation of justice. This step shall help in reducing the pendency of matters before various High Courts by increasing the bench strength.

4. Institutionalised process of elevation of Judicial Members of the ITAT to be appointed as Judges of High Court

Till now, very few Members of the ITAT as well as other Tribunals have been elevated to the High Courts. This process of selection should be institutionalised which will help in bringing transparency. It is also desired that all the High Courts have a permanent tax bench where a Judicial Member of impeccable integrity could be elevated from the ITAT. Members of the ITAT, due to their specialised knowledge and experience in ‘tax’ and ‘business accounts’, would be able to understand and decide the issues efficaciously. This may also act as an attraction for many young and bright lawyers to join the Tribunals as Members.

5. Special allocation of Funds in the Budget of every year should be made for the functioning of the Courts just as allocations are made for the defence of our Country

The Judiciary is one of the pillar of the democracy. There must be a separate allocation of funds for the judiciary in each budget. The procedure for disbursement of funds to the judiciary must be simplified. It is worth considering that Finance Ministry may make it a point to meet the concerned Officials of the judiciary and hold discussions about the funds required for modernisation and allocate the required funds to the Judiciary from time to time.

As per the newspaper report dated 3-8-2019 (Times of India, Saturday), it has been highlighted that more than half of the District Courts in the Country do not have functional washrooms and other amenities. In Mumbai, there is only one special court designated to deal with prosecution matters of Direct taxes as well as other economic offenses. There are more than 10,000 cases pending to be heard. There are matters pending for framing charges since more than 15 years. Unless some remedial measures are taken, entire system may collapse. The need of the hour is to have proper infrastructure for the Judiciary. This is possible only when proper allocation of funds for the judiciary is done.

6. Responsive system to be established in respective Ministries to discuss and take action on suggestions made by the Apex Court, High Courts and other Judicial authorities.

It has been observed that various High Courts make have several recommendations to the Government of India to look into certain matters and take appropriate measures. However, there is no mechanism to find out whether the issue is brought to the notice of Ministry concerned and what follow up action has been taken. It is therefore, advisable to put up such suggestions on the website of the High Courts or of the concerned Ministry where the progress on each direction can be tracked, scrutinised and appropriate action can be taken. This will bring transparency in the functioning of the Ministry and will also bring accountability.

7. Authority under Prohibition of Benami Property Transactions Act, 1988 and The Prevention of Money Laundering Act, 2002

The Adjudicating Authorities under the Prohibition of Benami Property Transactions Act, 1988, and under The Prevention of Money laundering Act are currently situated at Delhi. Due to this reason, litigants have to travel to Delhi for adjudication of their matters, be it for a mere adjournment or for a complete hearing. This causes great hardship to the litigants apart from the already existing implications under the Acts sought to be disputed by them.

At present there is no Adjudicating Authority at Mumbai or in any other part of the country. It is desired that the Adjudicating Authority may be set up in across the country to provide effective redressal dispute resolution mechanism for litigants that are located away from the Capital Cities. Till the time such zones are established, the Adjudicating Authority may be allowed to have camps in different places and may be allowed to have touring benches where the number of appeals are substantial in number. This will help the litigants in saving precious time and cost of litigation will come down. It would further help the litigants to get speedy justice.

We hope Government will consider these proposals that shall, in our opinion, greatly streamline the disposal of cases. We are sure that the implementation of these suggestions shall go a long way in providing effective and efficacious remedy to the litigants across the country.

Dr. K Shivaram
Chairman, Editorial Board

 

For the AIFTP to lose two of its stalwarts in a short period of one month is unbearable one for any institution and AIFTP cannot be an exception to the same.

I recall my first visit to Ranchi way back in 1995 or thereabout for enrolling new members of AIFTP. Mr. S. K. Poddar was the first to be enrolled alongwith a few others from Jamshedpur as well as Ranchi. Mr. Poddar happened to be the first preferred individual by the collegium, to lead the Federation as its President during 2012 & 2013. During his tenure, he planned all the programmes well in advance and executed the same on time. He was instrumental to the amendments carried out to the Constitution of AIFTP at Mumbai on 25th December, 2013. I had the privilege of working with him for a quite long time during which I found him to be a person who maintained highest tradition of legal profession and followed standard of ethics. On direct taxes he was master of his own right. Being a Rotarian he also had the inclination of helping the needy, financially as well as in the legal field. Though he is no more with us I am confident his absence would always be felt by one and all.

My sincere homage to the departed soul. I pray Almighty to grant him eternal peace and enough strength to his family members to withstand such a bolt from the blue.

— P. C. Joshi, Advocate, Past President

Late Shri S. K. Poddar was a highly renowned leader from Ranchi, who was well known for his ethics, professionalism and knowledge.

I had the pleasure and privilege of interacting with Late Shri S. K. Poddar for a long time. He was quite fond of travelling, exploring new places and sharing his insights in the field with both experts and novices. I had the opportunity of visiting Bali with Shri Poddar to attend the AOTCA conference. He had an amicable and calm personality. One of his endearing traits was that despite his immense knowledge and expertise in the field he was down to earth. He will remain as a great source of inspiration to the young and upcoming tax professionals.

I pray to Almighty that his soul may rest in peace.

— Dr. K. Shivaram, Sr. Advocate, Past President

I was saddened to know that Shri S. K. Poddar, Advocate has gone to his heavenly abode on 18th June, 2019. He was a very learned, sober & simple man and having in-depth knowledge particularly of Income Tax law. He will always be remembered for his services rendered to the Federation as a Lifetime Member of the Federation. He was a man who will be remembered by the tax fraternity for the years together because of his qualities of firm determination, humbleness and promoting young generation in the field of law.

He selflessly promoted the Federation and served the tex fraternity. The Federation lost a sincere, devoted, dedicated, determined, courteous member, who promoted and spread the Federation all over the country. The Federation, AIFTP shall never forget him and his name would be stamped in golden words in the history of the AIFTP for his dynamic leadership and spreading the light of AIFTP. He will also be remembered for the amendment made in AIFTP Constitution to reduce the tenure from 2 years to 1 year for the office bearers.

I shall always cherish the sweet memories when I was National President of the Federation and he was National Dy. President and gave charge to him as National President at Ranchi in December, 2011.

In this critical hour of grief, I express my heart-felt condolences and pray to the Almighty to give peace to the departed soul and strength to the members of the bereaved family. We hope that his family members will follow the path paved by him, support the activities of the Federation and glorify his name.

— M. L. Patodi, Advocate, Past President

Shri S. K. Poddar, a very pertinent name in the All India Federation of Tax Practitioners, was one of the pillars of AIFTP.

He was like a fiend, philosopher and guide to me and I could move back to him in case of any support.

He was also one of my support pillars during my Presidentship, who always encouraged me to accept the responsibility of the National President of AIFTP, inspite of my health issues.

He has been an Advocate of repute in the matters of Direct Taxes and was well known and respected in the profession, a very learned and knowledgeable person who has presided over various sessions on matters relating to Direct Taxes.

An avid listener and a very good orator, who used to capture the audiences with his oratory skills and knowledge of the subjects he spoke on.

During his stint as National President of AIFTP, he took the Federation to greater heights.

He was equally a good social worker, who was always ready to donate for the social causes and helped the society in many ways.

It is difficult to absorb that Shri Poddarji is no more amongst us and is a great loss to the Federation and to me personally and I pray to God that his soul rest in peace.

Om Shanti Shanti Shanti

— J. D. Nankani, Advocate, Past President

It’s a very unfortunate time for the Federation to notice that within a span of 21 days two star lights of the glorious institution have made exit from this mortal world leaving all of us without guidance and direction. Really it’s a big blow to the movement of the organisers as both Dr. N. M. Ranka, and Shri Sheoji Kumar Poddar as Past Presidents as also great leaders led the Federation to the best appreciation of all the concerned. Both the Past Presidents have proved themselves as the most loved sons of Rajasthan and Jharkhand states in all respects and it’s a proven fact that they had taken the federation to greater heights in their respective tenures as National Presidents.

It is really a wonderful experience for me to associate with the two great leaders who provided me great and best direction light and guidance to me as from me only the tenure of the office of the president was reduced to one year. I have seen a true Gandhian president in Dr. Navrathan Ranka ji while I have experienced a real rebel star in Shri Poddar ji who strived hard for value based discipline in all administrative aspects with only object of ever marching Federation. Thus, we have all been denied by the Almighty of the association of both the leaders whose absence from us is incapable of being compensated and I am sure both would state at with their kind heavenly blessings. Simultaneously, let all of us convey our heartfelt grief to the members of the bereaved family and pray God to grant eternal peace to the departed souls of the great stalwarts of the Federation.

— Dr. M. V. K. Moorthy, Advocate, Past President

A TRIBUTE TO SHRI S. K. PODDAR – A DOYEN OF THE FEDERATION

On 18th June 2019, Federation was stunned by painful reality of passing away of our former President Shri S. K. Poddar who left for his heavenly abode, leaving behind a multitude of grief stricken members of the Federation. As the Federation had not come out of the profound grief caused by the painful death of Shri N. M. Ranka Ji that the another blow was suffered by the Federation by the sad demise of Shri S. K. Poddar Ji.

Shri Poddar Ji was one of the finest luminary, rose higher and higher through his inhumanly hard work. He always led an ethical and moral life.

He was not only a model lawyer but also a symbol of inspiration to the young lawyers and a role model of all the professionals.

He was practicing in direct taxes. His contribution in getting the law laid down by the Judiciary is note-worthy and rememberable.

He was a man of principles. His thoughts were valuable and his decisiveness was remarkable which had solved many problems cropped up while conducting affairs of Federation.

Though Mr. Poddar is not with us in flesh and blood, his relentless perseverance, compassion and dedication to the practice of law will live on for all time to come. He will be remembered with great reverence and feeling of indebtedness. To adopt the ethics and moral values set by him will be the great Tribute to him.

May the departed soul rest in peace in the vicinity of God and we pray Almighty to give strength to the family, to the legal fraternity and to the members of Federation to bear this irreparable loss.

— Smt. Prem Lata Bansal, Sr. Advocate, Past President

Shri Shivkumar Ji Poddar, Past President of All India Federation of Tax Practitioners left for his heavenly abode on 18-6-2019.

It is a great loss to the fraternity of Tax Practitioners and the Organization at large. His contribution in building the AIFTP and promoting it in Eastern Sector in particular is unforgettable. Late Shri Shiv Babu had a very pleasant personality and affectionate nature. When he mix with his fellow members of the AIFTP, one could never imagine the stature of the persona of Shri Shivkumar Ji Poddar. He would never let you feel that he is an acclaimed Advocate in the field of taxation at Ranchi. Whenever one met Shiv Babu he felt comfortable and Shiv Babu always bestowed his love and affection to fellow members one and all and we always enjoyed his company. Shiv Babu has in-depth knowledge of the Tax Laws and was always willing to help his fellow Tax Advocates whenever and wherever needed. He had been instrumental in bringing the Organization to new heights. It is unfortunate for our organization that we lost two stalwarts Late Shri N.M. Ranka and Late Shri Shiv Babu Poddar in a short span of time in this year.

I convey my condolences to the family members and pray the almighty to accord the eternal piece to the departed soul.

— G. N. Purohit, Sr. Advocate, Imm. Past President

OBITUARY

Shri Sheo Kumar Poddar, popularly known as “Sheoji” an Advocate and Past President of All India Federation of Tax Practitioners has left for his heavenly abode on June 18, 2019 at Ranch at the age of 79 years. He was a practicing lawyer over five decades. During his professional career he had represented cases at Kolkata, Patna, Delhi, Hyderabad, Bangalore, Cuttack, Guwahati, Jamshedpur, Dhanbad besides permanently at Ranchi. He had been awarded many awards during his carrier and was awarded Life Time Achievement Award in December, 2018 at National Convention of All India Federation of Tax Practitioners held at Guwahati by Hon’ble Judge of Supreme Court of India. He had evinced many social and culture achievements. So far as the Federation is concerned, it is great loss for all of us. I had a privilege working with him as a Treasurer, when he was National President of AIFTP. I had fond memories with him.

— H. N. Motiwalla, Editor, AIFTP Journal

The idea of Golden Jubilee celebration of setting of Indore Bench of Income Tax Appellate Tribunal was conceived during the 78th Foundation Day of ITAT event on 25th January 2019.

Tax Bar at Tribunal, Indore caught on the idea and worked extensively with the Hon’ble Judicial Member Shri Kul Bharat and Hon’ble Accountant Member Shri Manish Borad to bring it into reality.

His lordship Hon’ble President ITAT, Justice Shri P. P. Bhatt and Hon’ble Vice President – Ahmedabad Zone, Shri Pramod Kumar guided and mentored the execution to the minutest detail.

Indore Bench of ITAT was set up on 2nd June 1969 and completed glorious 50 years discharging its function efficaciously and effectively in the justice delivery mechanism on direct tax matters. There have been several landmark decisions which have held their fort right up to the Apex Court.

The theme of the event was conceptualised as “Road Travelled and the Road Ahead…”. Everything was worked around this theme with thematic approach on all aspect of creating an event logo, invitation cards, souvenir and Bar members directory, video presentation, guests introduction, symposium for all the stakeholders which included professionals, Department authorities and students, banquet ambience, mementos to the guests, gifts to the Bar members of tie and lapel pin.

Standing left to right are

  1. CA Vijay Bansal, Treasurer, Tax Bar

  2. Adv. Girish Agrawal, Organizing Secretary, Tax Bar

  3. Hon’ble Judicial Member, ITAT Indore, Shri Kul Bharat

  4. Hon’ble Pr. CCIT, MP & CG, Shri A. K. Chauhan

  5. Hon’ble Vice President, Mumbai Zone, Shri G. S. Pannu

  6. Hon’ble President ITAT, Justice Shri P. P. Bhatt

  7. Hon’ble Vice President, Ahmedabad Zone, Shri Pramod Kumar

  8. Hon’ble Accountant Member, ITAT Indore, Shri Manish Borad

  9. CA S. S. Deshpande, President, Tax Bar

  10. Sr. Adv. Sumit Nema, Hon. Secretary, Tax Bar

  11. CA Hitesh Mehta, Souvenir Committee, Tax Bar

  12. Adv. Hitesh Chimnani, Executive Committee Member, Tax Bar

Hon’ble President ITAT, Justice Shri P. P. Bhatt presided over the function as the Chief Guest who was joined by Hon’ble Vice President – Ahmedabad Zone Shri Pramod Kumar and Vice President – Mumbai Zone Shri G. S. Pannu and Principal Chief Commissioner of Income Tax, MP & C. G. Shri A. K. Chauhan.

All the Hon’ble Members of ITAT from Ahmedabad Zone, Hon’ble current and past Members ITAT who had been posted at Indore Bench, all attended the function and made it an unforgettable experience for all.

A video presentation showcasing 50 glorious years of Indore Bench of ITAT made everyone nostalgic and led to an overdrive of emotions.

Shri S. S. Deshpande, President, Tax Bar welcomed all the guests. Shri Girish Agrawal, Organizing Secretary, Tax Bar took all through the entire event with everlasting impressions and Shri Sumit Nema, Secretary extended hearty vote of thanks to all in making it a grand success in the history of set up of ITAT.

Speaking at the Golden Jubilee function, Hon’ble President ITAT, Justice Shri P. P. Bhatt who inaugurated the e-court of Indore Bench said e-courts prove to be a milestone in the judiciary. He assured for the setting up of own infrastructure for Indore Bench of ITAT very soon with land already having been identified and proposal underway for further approvals.

Both the Hon’ble Vice Presidents also addressed on the occasion and expressed their best wishes for the functioning of Indore Bench of ITAT.

A souvenir cum directory was released on the occasion along with holding of blood donation camp, plantation at CA Garden and a Press Conference by the Hon’ble President ITAT, Justice Shri P. P. Bhatt.

This event of Golden Jubilee celebration of setting up and functioning of a bench of ITAT has created a landmark in the history of ITAT since 1941 with a high level of bench-marking for the ensuing years.

Thanks,

CA. Shri Subhash Deshpande, President of ITAT Indore Bar.

CA. Sumit Nema, Secretary

CA. Shri Girish Agrawal, Joint Secretary

Other photographs of the event:

Sitting on the dais, left to right are

  1. Adv. Girish Agrawal, Organizing Secretary, Tax Bar

  2. Hon’ble Judicial Member, ITAT Indore, Shri Kul Bharat

  3. Hon’ble Pr. CCIT, MP & CG, Shri A. K. Chauhan

  4. Hon’ble Vice President, Mumbai Zone, Shri G.S. Pannu

  5. Hon’ble Vice President, Ahmedabad Zone, Shri Pramod Kumar

  6. Hon’ble Accountant Member, ITAT Indore, Shri Manish Borad

Sitting on the dais, left to right are

  1. Adv. Girish Agrawal, Organizing Secretary, Tax Bar

  2. Hon’ble Judicial Member, ITAT Indore, Shri Kul Bharat

  3. Hon’ble Pr. CCIT, MP & CG, Shri A. K. Chauhan

  4. Hon’ble Vice President, Mumbai Zone, Shri G. S. Pannu

  5. Hon’ble President ITAT, Justice Shri P. P. Bhatt

  6. Hon’ble Vice President, Ahmedabad Zone, Shri Pramod Kumar

Figures of institution, Disposal and Pendency of Appeals as on 01-07-2019

Bench

No. of Benc.

No Mem.

Institution

Disposal

Pendency

SMC Pendency

Mumbai

11

17

590

687

16132

2166

Pune

3

6

119

285

5442

282

Nagpur

1

0

16

0

1012

184

Raipur

 

0

20

1

1080

69

Panji

1

0

24

0

929

183

Delhi

9

13

707

310

23987

2263

Deharadun (Circuit )

 

 

27

0

27

27

Agra

1

2

48

12

1116

204

Bilaspur

0

Lucknow

2

2

89

22

1193

92

Allahabad

1

0

8

0

564

171

Varanasi (Circuit Bench)

 

 

18

29

355

81

Jabalpur

1

1

30

0

758

75

Kolkatta

5

7

244

350

3534

597

Patna

1

0

26

96

495

154

Cuttack

1

2

59

27

1033

45

Guwahati

1

0

58

29

812

179

Ranchi (Jhark Hand) Circuit Bench

1

0

8

19

648

172

Chennai

4

5

276

291

5505

314

Bangalore

3

6

283

295

5655

149

Cochin

1

2

19

123

548

7

Ahemdabad

4

7

234

297

7259

1819

Surat

1

1

23

43

3031

780

Indore

1

2

117

141

2374

106

Rajkot

1

0

28

31

1657

403

Hyderabad

2

4

163

64

5090

785

Vishakha

1

2

124

100

958

282

Patnam

 

 

 

 

 

 

Chandigarh

2

4

97

75

2122

*381

Amritsar

1

1

47

53

1743

569

Jaipur

2

3

206

81

1777

811

Jodhpur

1

0

32

0

536

132

Total

63

87

3740

3461

97372

13101

 

 

39

Vacancy

 

 

 

Nos. of Members

126

126

 

 

 

 

Query 1

Nature of sale when the claim of exempted sale u/s 6(2) of CST is disallowed

A dealer makes exempted sales u/s 6(2) of the CST Act, 1956 to the buyer dealer, who is within same state. The form ‘E1’ is not received from the seller, though ‘C’ form is received from the buyer. The assessing authority suggests that since the exemption is not allowable, the sale will be local sale and benefit of ‘C’ form also can not be given. Whether the view of the assessing authority is correct?

Reply

The elaborated facts can be mentioned as under:

The dealer purchases goods in the course of inter-state trade from other state vendors. When the goods are in movement, the dealer effects the sale of such goods (referred to as ‘in transit sale’). The buyer includes buyers situated within same state. For exempted ‘in transit sale’ dealer obtains form ‘E1’ from his vendors and form ‘C’ from his buyers. In few cases, dealer receives ‘C’ forms but does not receive ‘E1’ forms in relation to sale made to intra state buyers. Therefore, the sale is not exempt but taxable. The issue for reply is under above circumstances, whether the tax will be attracted under CST Act or local Act.

Before we give reply, it will be useful to refer to relevant legal back ground.

The inter state sales are covered by CST Act. As per the Scheme of CST Act, every inter state sale is taxable. However, under CST Act, there are two kinds of inter state sales. The nature of inter state sale transaction is defined in section 3 of the CST Act. The said section reads as under;

“S.3. When is a sale or purchase of goods said to take place in the course of inter-State trade of commerce.- A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase-

  1. occasions the movement of goods from one State to another; or

  2. is effected by a transfer of documents of title to the goods during their movement from one State to another.

Explanation1.– Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee.

Explanation 2.– Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of the goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State…….”

As per section 3(a) the direct inter state sale between two parties is covered.

There is extension of inter state sale by section 3( b). As per this section the sale effected by transfer of documents of title to goods, when the goods are in inter state movement. As per Explanation -1, to section 3(b), the movement commences, when the goods are loaded in transport and it terminates upon taking delivery from the transport. Any sale made during above movement is inter state sale. They are also referred to ‘in transit sale’ in the market.

Section 6(2) of the CST Act seeks to give exemption to such ‘in transit sale’. Section 6(2) is reproduced below for ready reference.

6 Liability to tax on inter-State sales

(2) Notwithstanding anything contained in sub-section (1) or sub-section (1A), where a sale of any goods in the course of inter-state trade or commerce has either occasioned the movement of such goods from one state to another or has been effected by a transfer of documents of title to such goods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of title to such goods to a registered dealer, if the

goods are of the description referred to in sub-section (3) of section 8, shall be exempt from tax under this Act.

Provided that no such subsequent sale shall be exempt from tax under this sub-section unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner and within the prescribed time or within such further time as that authority may, for sufficient cause, permit,-

  1. a certificate duly filled and signed by the registered dealer from whom the goods were purchased containing the prescribed particulars in a prescribed form obtained from the prescribed authority, and

  2. if the subsequent sale is made to a registered dealer, a declaration referred to in sub-section (4) of section 8.

Provided, further that it shall not be necessary to furnish the declaration referred to in clause (b) of the preceding proviso in respect of a subsequent sale of goods if, –

  1. the sale or purchase of such goods is, under the sales tax law of the appropriate State exempt from tax generally or is subject to tax generally at a rate which is lower than three per cent or such reduced rate as may be notified by the Central Government, by notification in the Official Gazette, under sub- section ( 1) of section 8 (whether called a tax or fee or by any other name); and

  2. the dealer effecting such subsequent sale proves to the satisfaction of the authority referred to in the preceding proviso that such sale is of the nature referred to in this sub-section.”

As per Scheme of section 6(2), the subsequent sale effected by transfer of documents of title to goods during inter state movement is exempt subject to production of form ‘E1’ as obtained from vendor and form ‘C’ as obtained from buyer.

If any of above two forms is not available then the exemption claim will not be allowable. However, the nature of transaction still remains inter- state sale. This is so because, the transaction is basically covered by section 3(b) which defines the inter state sale, as discussed above. Simply because one form is not available, the nature of transaction can not change but the exemption will get denied. The transaction will become taxable under CST Act. The tax is to be levied as per provisions of CST Act. In case, ‘C’ form is received, then, the tax will be attracted at lower rate of 2% under CST Act.

The above situation is also well covered by other connected provisions. For example, against the assessment order, the dealer can go in appeal and also produce missing forms in appeal. Similarly, dealer can also file rectification on getting the forms. If the transactions are not assessed under CST Act but under Local Act than the above subsequent proceedings will become redundant. Only if, the transactions are taxed under CST Act then in subsequent proceedings, the missing forms can be produced and exemption benefit can be availed.

Further, the local buyer in state obtains ‘C’ form from the sales tax department of the same state, which is supplied to them. In his case, it is inter state purchase that is why he is able to obtain the ‘C’ form. Thus, the nature of transaction remains to be inter state, in spite of one of the forms is not received. Under above circumstances, taxing selling dealer under Local Act will be contradictory and illegal. The same department can not treat the same transaction in opposite manner.

Thus the nature of transaction in the given circumstances will be inter-state sale and should be taxable accordingly under CST Act, 1956.

 

  1. Do the provisions of section 44ADA apply to an actor, who is acting only in TV serials? What if he is acting only in web serials, available only on Netflix or Amazon Prime? Would it make any difference if he has acted in a small role in one film during an earlier year, where he earned a small fraction of his total earnings?

    Ans: S.44ADA applies to a resident assessee who is engaged in a profession. The term “profession” has been defined in s.44A. The profession of film artist (actor, etc) is notified under s.44A for the purpose. The notification is not that of an actor, but of an actor who is a film artist. Since the person in this case is an actor, but does not act in films, but in serials broadcast on TV or on the web, he does not qualify as carrying on a profession.

  2. Mr A has booked a flat on allotment letter in 2012. The project is not completed. Now the builder is offering another flat under- construction on surrender of original allotment letter. Can Mr. A claim benefit of long term gains and investment in new flat?

    Ans. The right to obtain a house under the allotment letter is a capital asset, which is a long term capital asset, since such right was acquired in 2012. This is however not a residential house, but the right to obtain a residential house. Therefore, Mr A can claim benefit of exemption under s. 54F, and not s. 54.

  3. Sitting fees and Commission are earned by a Non Executive Director, on which the Company has deducted tax @10% u/s194J. Should this be taxed as income from other sources or as business income? The company is a Public Ltd. Co. and the amount is large, about ₹ 85

    lakh. If it is business income, then whether presumptive tax is applicable?

    Ans. Directorship is not a profession as defined in s.44A. The issue of whether the director is carrying on a business or not depends upon various factors – whether he is engaged in acting as a director in any other companies, whether he carries on any other activity, the time he spends on his role as a director and in the other activities, etc. Based on these tests, if he is regarded as engaged in a business, then the provisions of s. 44AD would apply, and he would have to offer to tax 8% of his gross receipts or the actual income that he has earned, whichever is higher.

  4. Mr and Mrs B have obtained a divorce. Under the consent terms filed before the Family Court, and under the terms of the divorce as decreed by the Family Court, Mr A has transferred one house to Mrs A, and has paid her a lump sum amount of ₹ 1 crore. Such amounts were received by Mrs A after the decree of divorce. Are such amounts taxable?

    Ans. As held by the Bombay High Court in the case of Princess Maheshwari Devi v. CIT 147 ITR 258, lumpsum alimony received on divorce is a capital receipt, which is not taxable. Though such amounts would not be regarded as having been received from a relative, since the receipt was after the divorce, the provisions of section 56(2)(x) would not apply to such amounts, since the assets and money is being received in consideration of agreeing to divorce, and cannot be said to have been received without any consideration.

     

Introduction:

In the month of April 2019 the New Delhi bench of the AAR on an application filed by Rod Retail Pvt. Ltd. has held that the supply of goods to the international passengers going abroad from ‘Duty Free’ shops may be taking place beyond the customs frontiers of India under Integrated GST Act, however, the said shops are within territory of India under the Central GST Act. This ruling resulted created an unfair situation in the hands of such ‘duty free’ shops leaving them uncompetitive.

To overcome this issue faced by a class of persons, the government notified such class of registered persons and laid down provisions exempting certain supplies made by such persons and grant of refund of tax charged on the inward supplies of goods received by them subject to the conditions as prescribed.

Notification No. 11 /2019 – Integrated Tax (Rate) issued on 29- 6- 2019 applicable w.e.f. 1-7-2019:

Exemption to any supply of goods by a retail outlet established in the departure area of an international airport, beyond the immigration counters, to an outgoing international tourist, from the whole of the integrated tax leviable thereon under section 5 of the Integrated Goods and Services Tax Act, 2017. Also, the

term “Outgoing international tourist” has been specified to mean a person not normally resident in India, who enters India for a stay of not more than six months for legitimate non-immigrant purposes. This has carved out the supplies made to person who does not fit in the definition and therefore, supplies made to a person other than an outgoing international tourist shall still be chargeable to GST.

For making supplies without payment of tax, the following documents and declaration are required:

  1. Details of passport;

  2. Details of boarding pass;

  3. A passenger declaration in the prescribed format;

  4. Copy of invoice evidencing that no tax is charged.

The retail outlets are required to prominently display a notice that tourist is eligible for purchase of goods without payment of domestic taxes.

Also, the records with respect to duty paid indigenous goods being brought to the retail outlets and their supplies to eligible passengers shall be maintained as per Annexure A in electronic form. Annexure is a statement correlating the inward supplies procured from domestic market on which tax is paid and supply of goods to the eligible passenger.

Since the outward supplies by retail outlets are exempt, they will not be eligible to claim input tax credit. Thus, it is clarified that the refund to be granted to retail outlets is not on account of the accumulated input tax credit but based on the invoices of the inward supplies of indigenous goods received by them.

Notification No. 11 /2019 – Central Tax ( Rate) issued on 29- 6- 2019 applicable w.e.f. 1-7-2019:

Specifying retail outlets established in the departure area of an international airport, beyond the immigration counters, making tax free supply of goods to an outgoing international tourist, as class of persons who shall be entitled to claim refund of applicable central tax paid on inward supply of such goods, subject to the conditions specified in rule 95A of the Central Goods and Services Tax Rules, 2017.

Eligibility and Conditions for claiming refund of tax paid on inward supplies:

  1. Registration under CGST Act: The retail outlets applying for refund shall be registered under the provisions of section 22 of the CGST Act read with the rules made thereunder and shall have a valid GSTIN.

  2. Location of retail outlets: Such retail outlets shall be established at departure area of the international airport beyond immigration counters.

    1. the inward supplies of goods were received by the said retail outlet from a registered person against a tax invoice;

    2. the said goods were supplied by the said retail outlet to an outgoing international tourist against foreign exchange without charging any tax;

    3. name and Goods and Services Tax Identification Number of the retail outlet is mentioned in the tax invoice for the inward supply;

Duty Free Shops and Duty Paid Shops:

“Duty Free Shops” which are point of sale for goods sourced from a warehoused licensed under Section 58A of the Customs Act, 1962 and duty paid indigenous goods. The procedure for procurement of imported/ warehoused goods is governed by the provisions contained in Customs Act. The procedure and applicable rules as specified under the Customs Act are required to be followed for procurement and supply of such goods.

“Duty Paid Shops” retailing duty paid indigenous goods. There is no special procedure for procurement of indigenous goods for sale by DFS or DPS. Therefore, all indigenous goods would have to be procured by DFS or DPS on payment of applicable tax when procured from the domestic market.

Manner of filing refund application: Till the time the online utility for filing the refund claim is made available on the common portal, the retail outlets shall claim refund manually, to the jurisdictional proper officer, in Form GST RFD10B on a monthly or quarterly basis, as the case may be.

The refund application shall be accompanied with the following documents:

  1. An undertaking by the retail outlets stating that the indigenous goods on which refund is being claimed have been received by such retail outlets;

  2. An undertaking by the retail outlets stating that the indigenous goods on which refund is being claimed have been sold to eligible passengers;

  3. Copies of the valid return furnished in FORM GSTR – 3B by the retail outlets for the period covered in the refund claim;

  4. Copies of FORM GSTR- 2A for the period covered in the refund claim; and

  5. Copies of the attested hard copies of the invoices on which refund is claimed but which are not reflected in FORM GSTR- 2A.

The manner of processing and sanctioning refund claims by proper officer has also been prescribed in the circular it is in lines with manner in which refunds are granted under GST. Due to absence of utility on the GST portal, all the procedures are manual.

The detailed procedure for refund of taxes paid on inward supply of indigenous goods by retail outlets established at departure area of the international airport beyond immigration counters when supplied to outgoing international tourist against foreign exchange are clarified in Circular No. 106/25/2019-GST dated 29-6-2019.

Government’s move to exempt supplies by retail outlets at the airport and allowing refund of taxes paid on inward supplies is likely to benefit both, the supplier and the outgoing international tourist. However, in allowing the benefit to outgoing international tourist, the government seems to have adopted a different path by exempting supply made by retail outlets. Treating such supplies as zero rated thereby allowing refund of input tax credit in respect of all eligible procurement of goods and services could have been more beneficial.

 

Truth, Purity, and unselfishness —

wherever these are present, there is no power below or above the sun to crush the possessor thereof. Equipped with these,

one individual is able to face the whole universe in opposition.

Swami Vivekanand

 

The Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman made her maiden Budget Speech today and presented the Union Budget 2019-20 before the Parliament. The key highlights of Indirect Tax proposals of Finance Bill 0.2 of 2019 are as follows:

Make In India

  • Basic Customs Duty increased on cashew kernels, PVC, tiles, auto parts, marble slabs, optical fibre cable, CCTV camera etc.

  • Exemptions from Custom Duty on certain electronic items now manufactured in India withdrawn.

  • End use based exemptions on palm stearin, fatty oils withdrawn.

  • Exemptions to various kinds of papers withdrawn.

  • 5% Basic Custom Duty imposed on imported books.

  • Customs duty reduced on certain raw materials.

Other Indirect Tax provisions

  • Export duty rationalised on raw and semi-finished leather

  • Increase in Special Additional Excise Duty and Road and Infrastructure Cess each by ₹ 1 per litre on petrol and diesel

  • Custom duty on gold and other precious metals increased

  • Legacy Dispute Resolution Scheme for quick closure of pending litigations in Central Excise and Service tax from pre-GST regime.

Salient features of Legacy Dispute Resolution Scheme 2019:

GST has just completed two years. An area that concerns is that we have huge pending litigations from pre-GST regime. More than ₹ 3.75 lakh crore is blocked in litigations in service tax and excise. There is a need to unload this baggage and allow business to move on. Therefore, a Legacy Dispute Resolution Scheme has been proposed that will allow quick closure of these litigations.

It is a dispute resolution cum amnesty scheme for resolution and settlement of legacy cases. It covers past disputes of taxes which have got subsumed in GST namely Central Excise, Service Tax and Cesses. All persons are eligible to avail the scheme except a few exclusions. Scheme shall become available from a date to be notified.

Relief available under Scheme:

Sr. No

Details

Amount

Relief

A

Tax dues relatable to SCN or appeal arising out of such SCN which is Pending as on 30.06.2019 and the amount of duty is;

<50 Lakhs

70% of Tax dues

>50 Lakhs

50% of Tax dues

B

Tax dues relatable to SCN for late fee or penalty only and the amount of duty has been paid or is nil

NIL

Entire amount of late fee or penalty

C

Tax Dues are relatable to amount in arrears* or Tax Dues are relatable to a mount in arrears and the declarant has indicated an amount of duty as payable but not paid it and the amount of duty involved is;

<50 Lakhs

60% of Tax dues

>50 Lakhs

40% of Tax dues

D

Tax dues are linked to an enquiry, investigation or audit against the declarant and the amount quantified on or before 30th June

<50 Lakhs

70% of Tax dues

>50 Lakhs

50% of Tax dues

E

Tax dues are on account of voluntary disclosure by the declarant

NIL

NO Relief

Important Definitions:

Sr. No

Scenario

Meaning of Tax Dues

A

Where a single appeal arising out of order is pending as on 30.06.2019

Total amount of duty which  is disputed

B

Where more than one appeal arising out of an order, one by the decedent and other a departmental appeal where such an appeal has not been heard finally on or before 30.06.2019

Sum total of amount disputed by both decedent and department

C

Where SCN has received on or before 30.06.2019

Amount of duty payable as per SCN

D

Where enquiry or investigation or audit is pending

Amount of duty payable which has been quantified on or before 30.06.2019

  1. Amount in Arrears: It means the amount of duty which is recoverable as arrears of duty under the indirect tax enactment, on account of—

    1. no appeal having been filed by the declarant against an order or an order in appeal before expiry of the period of time for filing appeal; or

    2. an order in appeal relating to the declarant attaining finality; or

    3. the declarant having filed a return under the indirect tax enactment on or before the 30th day of June, 2019, wherein he has admitted a tax liability but not paid it.

  2. Amount of Duty: It means the amount of central excise duty, the service tax and the cess payable under the indirect tax enactment.

  3. Appellate Forum: It means the Supreme Court or the High Court or the Customs, Excise and Service Tax Appellate Tribunal or the Commissioner (Appeals).

  4. Enquiry or Investigation: It includes search of premises, issuance of summons, requiring the production of accounts, documents or other evidence, recording of statements.

Eligibility and Exclusions:

All persons shall be eligible to make a declaration under this scheme except:

  • where appeal filed before the appellate forum and final hearing has taken place on or before 30.06.2019.

  • where SCN has been issued AND final hearing has taken place on or before 30.06.2019.

  • who have been convicted for any offence under any provision for the matter for which he intends to file a declaration.

  • who have been subjected to any enquiry or investigation or audit AND amount of duty involved has not been quantified on or before 30.06.2019.

  • who have been issued a show cause notice for an erroneous refund or refund.

  • persons making a voluntary disclosure (i) after being subjected to any enquiry or investigation or audit, or (ii) having filed a return wherein he has indicated an amount of duty as payable, but has not paid it.

  • who have filed an application in the Settlement Commission.

  • persons seeking to make declarations with respect to excisable goods set forth in the Fourth Schedule to the Central Excise Act, 1944.

 

The more this power of concentration,

the more knowledge is acquired, because this is the one and only method

of acquiring knowledge.

Swami Vivekanand