1. I am following cash system of accounting. I collect GST amount in bill and keep separate account of GST collection as and when I receive, but pay as per bill after deducting ITC as and when paid by me. The issue is whether section 43B applies to tax collection and kept separately? If yes, then is it to apply as per bill or receipt? The claim of ITC in return but not paid during the year – should it be offered as income?
Ans. Section 43B would apply to GST payments. As per section 145A(ii), for determining income chargeable under the head “Profits and gains of Business or Profession”, the valuation of sale of goods or services shall be adjusted to include the amount of any tax, duty, cess or fee actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation. The sales would therefore have to be grossed up to include GST collected on the sales. GST would be allowable as an expense as and when paid. GST payable would be net of ITC, and hence such net amount of GST would be deductible, effectively making the ITC actually claimed in the GST return taxable.
2. I have a long term capital loss of ₹ 2.25 lakh (computed without indexation or substitution of FMV as of 1-2-2018) on sale of listed equity shares on the stock exchange, and also have a long term capital gain of ₹ 18 lakh (computed with indexation of cost). Can I set off the loss on sale of shares against the gain on sale of property?
Ans. Any long term capital loss computed under sections 48 to 55 can be set off against any other long term capital gain arrived at under a similar computation under the provisions of section 70(3). However, the question that arises is whether the computation of long term capital loss, being without indexation, is a similar computation as the long term capital gain on sale of property, which is with indexation of cost.
The CBDT has clarified, vide its answer to Q No 24 of the FAQs issued by it under F. No. 370149/20/2018-TPL dated 4th February 2018, that long-term capital loss arising from transfer of shares, on which STT has been paid, made on or after 1st April, 2018 will be allowed to be set-off and carried forward in accordance with existing provisions of the Act, and therefore, can be set-off against any other long-term capital gains. Therefore, the long term loss on sale of shares can be set off against long term capital gains on sale of property.
3. I have paid a construction contractor ₹ 45 lakh towards contract for construction of my house during the period from 1st April 2019 to 31st August 2019. I am paying further amounts of ₹ 30 lakh from September 2019 to March 2020. Am I required to deduct TDS under section 194M, and on what amount?
Ans. The provisions of section 194M came into effect from 1st September 2019, and therefore tax is required to be deducted at source from payments made after that date. The proviso to section 194M states that no deduction is required to be made under this section if the aggregate of such sums credited or paid during a financial year does not exceed ₹ 50 lakh. Therefore, the total of all payments/credits during a year is required to be seen to understand whether deduction is required.
In the facts as given, tax will be required to be deducted on ₹ 30 lakh, being the payments made after the section came into force, since the payments for the year exceed ₹ 50 lakh. No tax is required to be deducted on ₹ 45 lakh, since those payments were made prior to the section coming into force.
4. Some companies provide incentives to their dealers in the form of
a. gift of vehicle/tv etc.
b. gift cheque
c. foreign travel vouchers.
What will be the position of taxability of such incentives in the hands of recipient as well as allowability to the company? Will it make any difference if it is given in the form of a prize?
Some companies arrange business meetings/conference of dealers in foreign countries, where the dealers are given travel coupons of various travel companies for family. What are the implications?
Ans. The above gifts of vehicle, TV, foreign travel voucher or travel coupons for family members of the dealer would be regarded as benefits or perquisites arising from business carried on by the dealers, and would be taxable under section 28(iv). Section 28(iv) however only applies to benefits or perquisites received in kind, and does not apply to receipts of money, as held by the Supreme Court in the case of CIT vs. Mahindra & Mahindra Ltd 404 ITR 1. The gift cheque, being a receipt of money, would not be taxable under section 28(iv), but would nevertheless be a taxable business receipt. It would not make any difference if the above items are given as prizes.