Dear Friends,

Wish you all a very Happy Deepavali. I pray to the almighty that this festival of lights fills lives of each one of us with brightness and optimism. Very soon the Finance Ministry will start pre-budget consultations. All the professional bodies, including AIFTP, is going to make their representations for improving the tax administration and seek mitigation of hardships faced by assesses who are burdened with unwarranted litigations. What has come to light in recent times is huge additions have been made invoking provisions of section 56(2)(x)(b)of the Income tax Act, 1961 (the Act). The sub-clause (B) provides that if the stamp duty valuation is more than the purchase consideration then the difference between the value adopted for determining the stamp duty paid or payable is treated as income in the hands of the purchaser in the year of purchase. This provision adversely effects the purchaser. It is important to note that the same amount is taxed in the hands of the seller as he is covered by the provisions of section 50C or section 43CA of the Act depending on under which head the income is assessable in the hands of the seller. The provisions section 56(2)(x)(b)of the Act came into operation from 1st April, 2017. There are many instances where the registration of the sale deed has taken place after 1st April, 2017. But the terms and conditions, especially the consideration, was agreed upon between the purchaser and seller much earlier. The first and second proviso protect the assesse from these harsh provisions of section 56(2)(x)(b)(B) of the Act. However, it is seen that protection provided under the proviso is not being extended to the assesse at assessment stage. The litigation causes hardship to the assesses, especially, when they are individuals. We should represent to the Government to drop these draconian provisions as Revenue’s interests are sufficiently protect by section 43CA and section 50C of the Act.

There is one more issue which needs to be considered for representation. The Hon’ble Supreme Court by its order dated 12th October, 2022 in the case Checkmate Services Pvt. Ltd vs. CIT in C.A. No. 2383 of 2016 has up held the Hon’ble Gujarat High Court’s order which was in favour of the Revenue. The issue before the Apex Court was whether deletion of second proviso to section 43B grants relief not only to the employer’s contribution deductible under section 36(1)(iv) of the Act but to employer’s contribution to EPF, ESIC, etc. also which is allowed as deduction under section 36(1)(va) of the Act. The Apex Court has deliberated upon several case laws and the statutory provisions. It has highlighted the scope of operation of section 3691)(iv) and section 36(1)(va) of the Act. According to the Hon’ble Supreme Court as far as the amounts covered under section 36(1)(va) of the Act are concerned the employer assesse is a trustee of the amounts collected from his employees. Thus, the obligation caste on him to comply with statutory time limits under the EPF,ESIC etc. is much heavier and he should discharged diligently. He cannot be given any lee way as it is given in the case of employer’s contribution covered under section 36(1)(iv) of the act. The Apex Court has even rejected the pleas based equity and hardship relying on the following observation in the case of Ajmera Housing Corporation vs. CIT(2010(8)SCC739.

“27. IT is trite law that a taxing statute is to be construed strictly. In a taxing Act one has to look merely at what is said in the relevant provision. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. There is no room for any intendment. There is no equity about be implied. There is no room for any intendment. There is no equity aout a tax. (See.: Cape Brandy Syndicate vs. Inland Revenue Commissioners (1921) 1 KB 64 and Federation of A.P. Chambers of Commerce and industry and Ors. v. State of A.P. and Ors. (2000) 6SCC 550. In interpreting a taxing statute, the Court must look squarely at the words of the statute and interpret them. Considerations of hardship, injustice and equity are entirely out of place in interpreting a taxing statute. (Also See: Commissioner of Sales Tax, Uttar Pradesh v. The Modi Sugar Mills Ltd. 1961(2) SCR 189)”

The amendments brought through Finance Act, 2021 also do not allow any deductions of employee’s contribution to EPF, ESI, etc. if the same is not paid to the exchequer with in the time limits provided under the respective statutes. The provisions are very stringent. The assesse losses the claim of deduction in case of a default due to genuine and reasonable cause. Effective representation has to be made before the Government to consider the hardship faced by assesses who are stuck in exceptional circumstances.

In this issued the AIFTP Journal esteemed professionals have shared their thoughts on issues which are relevant and important. I thank them for sparing their valuable time for the Journal. Once again Happy Celebrations for the festival of lights.

K. Gopal,


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