Income Tax Resources
(Selected replies to queries in the forums)
Pooja expenses are allowable business expenditure which relate to the business of the assessee such as Vishkarma Jayanti and local festivals which are allowable, as there is no monetary limit for the purpose.
Pooja expenses which do not relate wholly to the business of the assessee will be disallowable as not incurred for the business.
ASSISTANT COMMISSIONER OF INCOME TAX vs. MAHARASHTRA METAL POWERS LTD.
TDS on Advertisement Charges
In view of the Supreme Court decision in Associated Cement Co. Ltd. v. CIT  201 ITR 435, the CBDT has issued the following guidelines in regard to the applicability of the provisions of section 194C :
(vii) Provisions of section 194C would apply in relation to payments made to persons who arrange advertisement, broadcasting, telecasting, etc.
Single Transaction = 30,000, Aggregate during FY = 75,000
Company, Firm, Co-op Soc., Local Authority = 2%
Individual, HUF = 1%
If No PAN OR Invalid PAN = 20%
Interest and penalty in service tax as it stands at the date when the default, which attract penalty is committed
Service tax late fee has been increased with effect from 08.04.2011 from the maximum amount of Rs. 2000/- to Rs. 20000/-. In this connection the abovesaid provision for increase in late fee for delay in filing of service tax return came into force from 08.04.2011 therefore only in those cases where the default occurred subsequent to the above date, would invite penalty at the increased rate and not in such cases where default has been made by the assessee prior to the said date. The above legal position has been upheld in catena of cases, decided by different courts including Hon’ble Apex Court and some of them are as follows:
1. CIT VS S. Samratatanghak (1988) 173 ITR 425 (ORR)
2. Brij Mohan VS CIT (1979) 120 ITR (SC)
3. Khubchand Kundanmal VS Union Bank of India (1991) 187 ITR 334 (Cal)
4. CIT VS Kantilal B. Shah (1988) 156 ITR 33 (Bom)
5. CIT VS Sheiku Munir (1988) 70 ITR 421 (M.P)
6. Sreepadam (HUF) VS CIT (1988) 172 ITR 371 (Ker)
7. CIT VS M. George & Bros (1983) 140 ITR 847 (Ker)
8. CIT VS Jyoti Swarup Agarwal (1978) 113 ITR 330 (All)
9. CIT VS Poplar Medical Hall (1998) 229 ITR 43 (Pat)
In the above cases the Hon’ble courts has laid down the principle in respect of applicability of rate of penalty. Rate of penalty has to be applied as it stands at the date when the default, which attract penalty is committed.
Attention is also drawn to the decision rendered by the Hon’ble Apex Court in the case of CIT VS Vegetable Products Ltd. (1973) 88 ITR 192, 198 (SC) and C.A. Abraham VS ITO 1961 (041) ITR 0425 SC 1961 (048) AIR 0609 SC, which held as under.
“Penalty provision should be intercepted as it stand and in case of doubt, in a manner favourable to the tax payer. If the court finds that the language of a taxing provision in ambiguous or capable of more meaning than one, then the courts has to adopt the interpretation which favour the assessee, more particularly so where the provision related to the imposition of penalty.
Liability to tax audit - Special cases
(Para 6.1 of ICAI Guidance Note on Tax Audit under Section 44AB of the Income-tax Act, 1961)
A trust/association/institution carrying on business may enjoy exemptions as the case may be under sections 10(21), 10(23A), 10(23B) or section 10(23BB) or section 10(23C) or section 11. A cooperative society carrying on business may enjoy deduction under section 80P. Such institutions/associations of persons will have to get their accounts audited and to furnish such audit report for purposes of section 44AB if their turnover in business exceeds Rs. 60 lakhs.
Finance Act (No. 2) 2009, w.e.f. 01/04/2010 has inserted sec. 206AA in the Income-tax Act which makes furnishing of PAN by the employee compulsory in case of payments liable to TDS. If employee (deductee) fails to furnish his/her PAN to the deductor , the deductor shall make TDS at a higher of the following rates
i. at the rate specified in the relevant provision of this Act; or
ii. at the rate or rates in force; or
iii. at the rate of twenty per cent.
The deductor has to determine the tax amount in all the three conditions and apply the higher rate of TDS . This section applies to any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVII-B of Income Tax Act. As chapter XVII-B covers all Payments including Salaries, Salaries are also covered by Section 206AA.
In case of salaries there can be following situations
a) Where the income of the employee computed for TDS u/s 192 is below taxable limit.
b) Where the income of the employee computed for TDS u/s 192 is above taxable limit.
In first situation, as the tax is not liable to be deducted no tax will be deducted. In the second case, if PAN is not furnished by the employee, the deductor will calculate the average rate of income-tax based on rates in force as provided in sec 192. If the tax so calculated is below 20%, deduction of tax will be made at the rate of 20% and in case the average rate exceeds 20%, tax is to deducted at the average rate. Education cess @ 2% and Secondary and Higher Education Cess @ 1% is not to be deducted, in case the TDS is deducted at 20% u/s 206AA of the Income-tax Act.
CIRCULAR NO. 05/2011, dated 16.08.2011
Depreciation rate for UPS
UPS is NOT an integral part of computer. It will be treated as Plant & Machinery.
Nestle India Ltd. vs Deputy Commissioner Of Income Tax on 30 April, 2007.
Payments to tenants for vacating premises are deductible
Expenditure incurred by the assessee towards amounts paid to tenants for vacating the premises which is sold has nexus with the transaction of sale, since without the tenants vacating the premises the building cannot be sold. The said expenditure would hence be allowable as deduction in the computation of capital gains - Naozar Chenoy v. CIT  234 ITR 95 (AP).
Silver Plates- Capital Asset or not?
Items of silverware including dinner plates of different sizes, finger bowls, jugs were held to be personal effects. [CIT v Benarashilal Kataruka (1990) 185 ITR 493 (Cal)].
But at the same time, a large number of the same type of silver articles cannot be treated as having been held for personal use and the assessing authority has to find out as to what are the articles which should reasonably be held by the assessee for personal use. [Ramanathan Chettiar R v CIT (1985) 152 ITR 493 (Mad)].
Income from letting out terrace for putting up hoarding and telecom towers
Assessable as income from house property.
Decision of the tribunal in case of
Satyam Shivam Sundaram Cooperative Society Ltd. in ITA No.516 to 514 M/2004
Pinto Park View Cooperative Housing Society Ltd. in ITA Nos.5859-5894/M/2003
Representation fees charged by a CA is subject to service tax or not?
With the amendments coming into force, exemption provided to CAs, CWAs and CSs vide notification No. 25/2006-ST, dated 13-7-2006 for Representation services is being withdrawn by Notification No.32/2011 – Service Tax , dated April 25, 2011. As such, the above services have become taxable from 1 May 2011.
TDS deduction on expenses re-imbursed to professionals
TDS should be on total payment including reimbursement of expenses, as per Circular No. 715 dated 8-8-1995.
However, in ITO v. Dr. Willmar Schwabe (2005) 3 SOT 71 (ITAT), it has been held that reimbursement of expenses for which bill is separately raised did not attract the provisions of section 194J.
Are Trade Advances and Loans & Advances, treated as same?
“Trade Advances” are not “Loans & Advances”
CIT vs. Arvind Kumar Jain (Delhi High Court)
Deduction of Tax on Service Tax component of rental income
vide circular No. 4/2008 of CBDT dt. 28.4.2008 it has been clarified that deduction u/s. 194 I would be required to be made on the amount of rent paid/payable without including the Service Tax. This is so, as Service Tax does not partake the nature of income of the landlord.
Depreciation on FORKLIFT
would be entitled to depreciation at the rate of 30 per cent.
CIT v. Woolcombers India Ltd.  41 CTR (Cal.) 63