Mandatorily provide facilities for accepting E-Payments from Nov

The Central Board of Direct Taxes ( CBDT ) has invited applications for Prescribing of certain electronic modes of payment under Section 269SU of the Income Tax Act, 1961. According to the newly inserted provision Section 269SU of the Income Tax Act, the objective of the Government to encourage digital economy and move towards a less-cash economy, which provides that every person having a business turnover of more than Rs 50 Crore shall mandatorily provide facilities for accepting payments through prescribed electronic modes. Further, a new provision namely Section 10A of the Income Tax Act was also inserted in the Payment and Settlement Systems Act 2007, which provides that no Bank or system provider shall impose any charge on a payer making the payment, or a beneficiary receiving payment, through electronic modes prescribed under Section 269SU of the Income-tax Act 1961. The provisions shall come into force with effect from 1st November, 2019. The applications are invited from the Banks and Payment System Providers, operating an authorised payment system under the Payment and Settlement Systems Act 2007, who are willing that their payment system may be taken into consideration for being prescribed as an eligible electronic payment mode under Section 269SU of the Income Tax Act 1961.

 

Imp Case Laws.

Goodyear India Ltd vs. CIT (Supreme Court)

Undisclosed income/ expenditure: A letter written in refutal of allegations contained in a news items with a without-prejudice offer cannot be treated as admission of non-disclosure or as an unconditional offer to pay tax. Also, the disclosure is by the USA Co and not by the assessee. It is not the case of the Dept that the amount has been received in the accounts of the assessee or spent for and on behalf of the assessee so as to be treated as undisclosed income of the assessee

Supreme Court rules on validity of notice of assessment issued at old address as appearing in PAN database

 

This Tax Alert summarizes a ruling of the Supreme Court (SC), dated 21 October 2019, in the case of I-Ven Interactive Ltd. (Taxpayer), on the issue of the validity of the notice of assessment issued at the Taxpayer’s old address as appearing in the Permanent Account Number (PAN) database. The Taxpayer had changed its address but failed to intimate the same to the tax authorities for updating in the PAN database. The Taxpayer, however, challenged the validity of the notices on the ground that the said notices were never received by the Taxpayer within the statutory time, as the same were sent to the Taxpayer’s old address. The First Appellate Authority and the Mumbai Income Tax Appellate Tribunal (Tribunal) held that the scrutiny assessment framed under Section (S.) 143(3) of the Indian Tax Laws (ITL) was invalid as the Tax Authority had completed assessment without assuming valid jurisdiction under S.143(2) of the ITL. Being aggrieved, the Tax Authority appealed before the Bombay High Court (HC) which confirmed the order of the lower authorities.

Reverse Charge on Renting of Motor Vehicle

Vide Notification No. 22/2019 a new entry in RCM list is incorporated which is effective from 1^st October 2019.

 

Imp Case laws

CIT vs. Odeon Builders Pvt. Ltd (Supreme Court)

S. 68/69 Bogus Purchases: Disallowance cannot be made solely on third party information without subjecting it to further scrutiny. The assessee has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. The AO has also not provided a copy of the statements to the assessee, thus denying it opportunity of cross examination

Provision for disputed income-tax/interest demands from Income-tax authorities in respect of which appeals are filed with higher authorities

A. Facts of the Case

1. A public sector undertaking is registered under the Companies Act, 1956. The Government has recognised it as a public financial institution under section 4A of the Act.

2. During the course of assessment proceedings under the Income-tax Act, 1961, certain disallowances/additions are made by the Assessing Officer and the demands are raised. Such demands are either paid by the company or are adjusted by the Income-tax (IT) authorities against the income-tax refund due to the company. In respect of disallowances/ additions, which are accepted by the company and are not contested/ appealed before the higher authorities, e.g., Income Tax Appellate Tribunal (ITAT), High Court, etc., necessary provision for the demand paid is duly made in the books of account of the company. However, in respect of the disallowances/additions which are contested before the higher authorities, the demands paid/adjusted are shown as advances under ‘income-tax/ interest payments subject to litigation’ under the ‘Schedule of Advances’.

3. The company has adopted the following accounting policy for making provision in respect of income-tax cases under appeal:

“In respect of disputed income-tax/interest/wealth tax demands, where the company is in appeal, provision for tax is made when the matter
is finally decided.”

Further, in all such cases, the appeals are filed and, therefore, no provision is made in the books of account.

4. Keeping in view the above accounting policy, no provision in this regard is made by the company in the books of account. In addition, the following disclosure is made under ‘contingent liabilities not provided for’ in the notes forming part of accounts:

“Disputed income-tax/interest demands paid/adjusted, against which the company has gone in appeal in view of the facts of the cases/ opinion obtained – Rs. x crore.”

5. The querist has stated that during the course of audit of accounts for the financial year 2003-2004, the Comptroller and Auditor General of India (C&AG) has observed that the above accounting policy is against the principle of prudence as per Accounting Standard (AS) 1, ‘Disclosure of Accounting Policies’, issued by the Institute of Chartered Accountants of India, and the company should have made provision for all known liabilities and losses.

6. In response to the C&AG’s query, the company has replied that no provision has been made since the appeals have been filed in these cases and the final decision is awaited. As regards the principle of prudence, it was submitted that the company has framed this policy since appeals are filed after giving due consideration to the past decisions of the appellate authorities, judicial pronouncements and opinions of tax experts and the company is hopeful to get full relief.

B. Query

7. The querist has sought the opinion of the Expert Advisory Committee on the following issues:

(a) Whether the accounting policy adopted by the company of not making provision in respect of taxation cases which are in appeal is correct as per the generally accepted accounting practices and the principle of prudence.

(b) In case the accounting policy being followed is not correct, what should be the prudent accounting policy?

(c) Whether the disclosure under ‘contingent liabilities’ is correct in view of the fact that the demands raised by the income-tax authorities have been paid/adjusted.

C. Points considered by the Committee

8. In the view of the Committee, where an enterprise disputes its liability on valid and bonafide reasons, e.g., on the basis of a past decision of a higher authority supporting the contention of the enterprise, or a retrospective amendment of law which goes in favour of the enterprise, or on the basis of the opinions of tax experts, etc., it is not ‘probable’ that a liability has been incurred on the balance sheet date and, accordingly, no provision is required as per the requirements of AS 29. Further, the Committee is also of the view that in determining whether a provision is required at the balance sheet date or not, events occurring after the balance sheet date but, before the date of finalisation of accounts, should also be taken into consideration. Where an enterprise does not provide for a disputed tax liability on the aforesaid grounds, the same should be considered as a contingent liability and a disclosure thereof should be made by way of a note to the accounts as required in paragraph 68 of AS 29

D. Opinion

On the basis of the above, the Committee is of the following opinion on the issues raised in paragraph 7 above:

(a) The accounting policy adopted by the company of not making provision in respect of taxation cases which are in appeal would be correct if the demands have been contested on valid and bonafide grounds as stated in paragraph 8above.

(b) In cases other than those covered in (a) above, provision therefor should be made.

(c) The disclosure under contingent liabilities would be correct if the non-provision for such demands is on the considerations stated in paragraph 8 above. The fact that the demands raised by the income-tax authorities have been paid/adjusted, has no relevance.

Opinion finalised by the Committee on 28.4.2005

SC upholds non-applicability of sales tax and service tax for members’ clubs basis the doctrine of mutuality

 

This Tax Alert summarizes a recent ruling of the Supreme Court Larger Bench (SC)¹. The issue before the Apex Court was applicability of doctrine of mutuality to incorporated or un-incorporated clubs post insertion of Article 366(29A) in the Constitution and levy of service tax on members’ clubs. 

Three Imp Verdicts On Black Money Penalty, Bogus Share Capital And Charity

UOI vs. Gautam Khaitan (Supreme Court)
Black Money Act: It is not correct to say that while exercising powers under Sections 85 and 86 of the Black Money Act, the Central Government has made the said Act retrospectively applicable from 01.07.2015. The penal provisions u/s 50 and 51 of the Black Money Act would come into play only when an assessee has failed to take benefit of S. 59 and neither disclosed assets covered by the Black Money Act nor paid the tax and penalty thereon

Imp SC Verdict On S. 143(2) Notice + Imp Verdict On Bogus Penny Stocks

PCIT vs. IVen Interactive Limited (Supreme Court)
S. 143(2): Mere mentioning of new address in the return of income is not enough. If change of address is not specifically intimated to the AO, he is justified in sending the notice at the address mentioned in PAN database. If the notice is sent within the period prescribed in s. 143(2), actual service of the notice upon the assessee is immaterial

Analysis of GST Circulars issued in October 2019

GST Circular October 2019