A charitable trust can’t avail of section 24(a) relief

ACIT v. Nandlal Tolani Charitable Trust [2014] 42 taxmann.com 154 (Mumbai - Tribunal)

A charitable trust, claiming exemption under section 11(1)(a), could only claim deduction of expenditure actually incurred to earn rental income. However, its claim for standard deduction under section 24(a) could not be allowed.

Facts:

• The assessee, a charitable trust, was engaged in various objects such as promotion of education, medical relief, etc. It filed return claiming exemption under section 11(1)(a). ;
• It also claimed deduction under section 24(a). The Assessing Officer (‘AO’) held that the net income of trust was to be considered for exemption under section 11 and no separate deduction under section 24 would be available;
• The CIT (A) upheld the order of AO. Aggrieved-assessee filed the instant appeal.

The Tribunal held as under:

• The income of a charitable trust, subject to its application for charitable purposes, is exempt from tax under Chapter III (sections 10 to13B). The said income does not form part of the total income of the entity to which it arises or accrues or is received;
• It is only the income forming part of the total income which would be subject to the computational provisions of Chapter IV (sections 14 to 59) of the Act;
• An income exempt under Chapter III of the Act, not forming part of the total income, would not enter the computation process to determine the quantum of income under the relevant head of income, each of which has its own computational provisions;
• Only the income as reflected in the accounts of the trust, is to be applied or deemed to have been applied for charitable purposes, and which, therefore, has to be computed in the commercial sense;
• This was even otherwise patent inasmuch as a trust could only apply the income as available with it, i.e., as arrived at following the accepted principles of commercial accounting. The computational provisions of the Act do not come into play, so that the said computation of the income would be de hors the same;
• Thus, accordingly, the assessee-trust could not claim standard deduction under section 24.

Organizing 'sankirtan' and 'bhandara' is charitable in nature; High Court allows section 12AA registration to trust

CIT v. Sri Radha Raman Niwas Trust [2014] 42 taxmann.com 77 (Allahabad)

Facts:

• The assessee-trust had filed application before CIT for purposes of registration under section 12AA and approval under section80G ;
• The CIT held that the objects like Akhand Naam Sankirtan, Thakur Sewa of Shri Girdhari Ji and organization of bhandaras on all important religious festivals were purely religious objects in nature and not in accordance with section 2(15);
• Accordingly, its registration application under section 12AA and approval request under section 80G were rejected. On appeal, the Tribunal held in favour of assessee. Aggrieved-CIT filed the instant appeal.

The High Court held in favour of assessee as under:

• From the objects of the trust it could not be said that the object and purpose of establishment of trust was not genuine and that activities as delineated in the object were not carried out by the trust;
• 'Akhand Naam Sankirtan' is one type of meditation and yoga and activity like bhandara are for providing food to persons, irrespective of any caste or religion, thus, unless it was proved that it was for any particular community or group of persons, registration under section 12AA could not be rejected;
• Thus, no error of law was found in finding of Tribunal.

Income Tax (I-T) refunds should be paid immediately after assessment of the taxpayer is over and without delay- I.T. Ombudsman for Kolkata

Income Tax (I-T) refunds should be paid immediately after assessment of the taxpayer is over and without delay, I-T Ombudsman for Kolkata K K Mahapatratoday said.

"Refunds should be given soon once the assessment is over and should happen in normal course," Mahapatra said at an interaction at the Merchants' Chamber here.

Stating that the office of the ombudsman gets numerous grievances over delay in IT refunds, he said although it should happen fast, the Central Processing Centre in Bangalore was hamstrung by processing claims.

"Any assessing officer should make refunds as soon a fund is created for the purpose," he said.

Mahapatra said the IT Ombudsman's office functioned under a set of guidelines and not statutes.

"Since we operate under a set of guidelines, it gives us the flexibility in several matters", he said.

However, Mahapatra said his office had asked the Central Board of Direct Taxes ( CBDT) and the finance ministry to reframe the guidelines to give empowerment.

The I-T Ombudsman said 80 per cent of the refund awards given by the Ombudsman were complied with by the assessing officer and the balance 20 per cent was intractable.

He also said any assessing officer not complying the Ombudsman's order in making genuine refund claims might get into career problems which might vary from a reflection in Annual Confidential (rpt) Confidential Report ( ACR) or place of posting.

Source: The Economic Times (http://bit.ly/1muJHHH)

If the assessee explains the source of money invested in immovable property, then no addition under section 69 called for

Commissioner of Income Tax v. Parvesh Mahajan (2014) 57 (I) ITCL 122 (P&H-High Court)

Where in order to establish that land was purchased out of loan received from a company, assessee had produced the copy of confirmations, PAN number, income-tax particulars and audited accounts of the lendor-company, no addition could be made on account of unexplained investments.

Reserve and surplus acquired on amalgamation is not revenue receipt; held not taxable under section 28(iv)

       ITO v. Kyal Developers (P.) Ltd [2014] 42 taxmann.com 70 (Kolkata - Tribunal)

   Enhancement of capital reserve due to amalgamation (in nature of merger) of assessee-company with other companies, was not in revenue field and, thus, was not in nature of income so as to be considered for taxation under section 28(iv).

    The Tribunal held as under:

• Provisions of section 28(iv) provide that besides the profits and gains from business or profession (‘PGBP’) carried on by the assessee, any other benefit or perquisite arising therefrom is also chargeable to tax under the head 'PGBP’;\
• The conditions precedents for such taxability are: 
• There should be benefit or perquisite, and 
• Such benefit or perquisite should arise from the business or the exercise of a profession;

• The expression 'arising from business' essentially implied that the benefit or perquisite would be in the nature of a business receipt or revenue receipt. No matter how wide could be the scope ofsection28(iv), the difference between a capital receipt and revenue receipt could not be overlooked; 
• Thus, unless a receipt was revenue receipt, it could not be in the nature of income and unless it was in nature of income, it could not be considered for taxation under section 28(iv); 
• The instant case was of amalgamation in the nature of merger which was proposed for the purpose of better, efficient and economical management to withstand the recessionary trend in the economy and to obtain advantage of economies of large scale; 
• Even if there was a benefit in the process, such a benefit could only be in the capital field, because it was related to the non-trading assets and capital. What it affected was the capital structure of the assessee-company and the manner in which business was consolidated; 
• Therefore, the enhancement of its capital reserve as a result of amalgamation could only be construed as a benefit accrued to the assessee. But such benefit was not in revenue field and was, thus, not in nature income. Accordingly, there was no occasion to invoke section 28(iv).

Order passed by CIT under section 119 is an administrative order which isn't appealable before ITAT.

CIT v. Rasida Ibrahimbhai Vohra [2014] 42 taxmann.com 85 (Gujarat)

Order passed by Commissioner under section 119(2)(b) was an administrative order against which appeal before Tribunal under section 253 was not maintainable.

Facts:

• The assessees approached the Commissioner for regularization of their returns in terms of section 119(2)(b);
• The CIT rejected said applications. However, the Tribunal directed the Commissioner to consider the case of the assessees afresh, after giving proper opportunity of being heard to them.
• Aggrieved-CIT filed the instant appeal.

The High Court held as under:

• In view of section 253, appeal against the order passed by the Commissioner under section 119(2)(b) was not maintainable;
• Such order passed by the Commissioner under section 119(2)(b)was an administrative order against which appeal before Tribunal under section 253 would not be maintainable;
• Thus, the Tribunal had materially erred in entertaining the appeals against the order passed by the Commissioner under section 119(2)(b) and had materially erred in passing the impugned order directing the Commissioner to consider the case of the respondent-assessees afresh.

Extended period of 6 years is not available for reassessment unless the Assessing Officer gets information to show escaped income is above 1 lakh

BBC World News Ltd. v. Assistant Director of Income-tax, Circle -1 (1) [2014] 42 taxmann.com 456 (Delhi)

Extended time-limit of 6 yrs under section 149(1)(b) requires data for prima facie computation of income escaping assessment. 

The High Court held as under:

• Extended time-limit of 6 years under section 149(1)(b) to initiate proceedings to bring to tax income escaping assessment cannot be availed by Assessing Officer without getting hold of data which prima facie supports computation of  quantum of income escaping assessment above one lakh rupee;
• The Assessing Officers may be handicapped in such cases but there are sufficient provisions in the Act to get hold of the said data before proceedings are initiated or reasons are recorded;
• The Assessing Officer must obtain such data for relevant assessment year and cannot even use data of subsequent or other assessment years as figures for every year will alter or change.

Trust can work for charity with life-long members; registration can't be revoked on ground of perpetual members

CIT v. Baba Kartar Singh Dukki Educational Trust [2014] 42 taxmann.com 17 (Punjab & Haryana)

The High Court held as under:

• The object of Section 12AA is to examine the genuineness of the objects of the Trust and though while examining genuineness, the income as well as resources of the Trust may be taken into consideration but any suspicion as to these facts cannot be the sole criteria for rejecting an application under Section 12A;
• Merely because a trustee was a life-long member of a trust, same could not itself raise an inference that trust was not charitable. Therefore, Tribunal was justified in directing registration of assessee as charitable trust.

Where to Invest for Retirement?

It is important for you to invest your savings in a way that they turn to be fruitful to you than being futile when you enter your golden days.

Retirement Planning should not be neglected and it is important to take serious measures to plan for your nest egg when the paid work ends. It is always advisable to start investing as early as possible in order to secure the life of your loved ones and yourself after retirement.

As you begin saving early, the magic of compounding works in your favor. You cannot solely depend on the pension that you get. You need to have some good money flowing regularly in your account in order to keep you smiling.

There are a number of investment options available in the market but it is up to you to choose wisely from the bouquet of investment plans. Your choice would surely be affected by your spending habits, your lifestyle of today and the one you wish to maintain after your retirement, your risk taking ability, the time that you have in hand before your paid work ends etc.

Investment Options for Retirement

Have a look at few of the investment options that can guide you in building a diversified portfolio for yourself. 

• Equities – If you are the one who has started off early with your retirement planning then you can opt for equities. Investment in equities provides you with long term capital gains. If you create a diversified portfolio while you opt for equities you are bound to grow your money in the long run.

• Fixed Deposits – If you are the one who wants to play very safe and are close to your retirement year then investing in fixed deposits can be a good option. You can include fixed deposits in your portfolio as they give you attractive returns especially to those who fall under lower tax bracket. 

• Mutual Funds – You can always go in for mutual funds that are available with different paying options and risk factors. You can choose funds as per your requirements keeping in mind the risk that you can take, frequency of returns and the amount that you can pay. 

• Insurance – There are a wide variety of insurance schemes available in the market. You do not have to become a party to all of them but yes few are surely advisable. Medical Insurances, life time covers and Pension Plans can form a part of your portfolio as in the long run they prove to be very beneficial and help you remain secured. 

• Employee Provident Funds (EPF) – If you are a salaried individual then you cannot ignore the importance of EPF. If you pursue your job for long term, this forced saving can give you a good lump sum amount to be added to your capital gains. If you abide by certain prescribed conditions, EPF enjoys EEE status which says that it is tax deferred.  

• Public Provident Fund (PPF) – It serves as a retirement planning tool especially to those who will not be having a regular flow of income in form of pension after their retirement. If you wish to open one PPF account for yourself you can do that through an authorized post office anywhere within the country, State Bank of India and few branches of other nationalized banks. The first private bank that was given a green signal for opening PPF accounts was ICICI. Few other private sector banks also operate PPF accounts. You can invest a minimum Rs. 500 to maximum Rs. 1,00,000 in one financial year and can get the facilities such as loan, withdrawal and extension of account.. You can create fixed deposits and earn tax free returns every year. 

• National Pension Scheme (NPS) – The National Pension Scheme is another retirement planning tool that was introduced by Government of India in 2009.The minimum contribution is Rs. 6,000 per year. There is no limit on maximum contribution. Although, the maximum contribution through cash is Rs. 25,000 per transaction. You get tax benefits and can choose from six investment funds that are available as per your requirement. You must choose between active choice and auto-choice for distribution of his contribution. If active choice is selected, the subscriber must indicate the percentage distribution between corporate, gilt and equity. The maximum investment allowed in equity is 50%.

Planning your nest egg should not be delayed. The early you start the more sound financial grounds you can establish for yourself and your loved ones. Holding money in accounts would not solve the purpose. However that is also important but you should think of means as per your risk appetite and time that may lead to generation of wealth.

Apart from this you also need to lead a healthy nutritious life so that when you sit back on your rocking chair you only have a pleasant view.

How to Download TDS Certificate in Form 16B?

Government has made it mandatory w.e.f 01.06.2013 on buyer of property to deduct TDS @ 1% on payment made after 01.06.2013 if Purchase Consideration of the Property exceeds Rs. 50 Lakh.  

Deductor can pay such TDS by any of the following mode:-

Either make the payment online (through e-tax payment option) immediately or make the payment subsequently through e-tax payment option (net-banking account) or by visiting any of the authorized Bank branches. However, such bank branches will make e-payment without digitization of any challan. The bank will get the challan details from the online form filled on www.tin-nsdl.com.

Once the Payment is made now the dedcuctor is required to issue TDS certificate in form 16B to the seller of the Property. Now the question is how to prepare or from where deductor can get such certificate for the purpose of issue to the seller? Answer is deductor can download such certificate from Traces website and issue to the seller.

Procedure to Download TDS certificate in form 16B is as follows:-

• Login to:https://www.tdscpc.gov.in/en/deductor-home.html

• Click on Register New User and you will be asked to provide basic details such as your 
• PAN 
• Date of Birth 
• Last, Middle and First Name and would also be required to further validate details of either tax deducted (option 1) or tax paid by you (option 2).

• On Validation of details, your account will be created.  User ID by default would be your PAN, You would have the option of providing Pass word of your choice.  A email would be automatically generated providing you an activation link with a second code being text on your mobile.  Having activated your account, it is now ready to be used.  Services currently available are view 26AS statement and down load Form 16B in case you are the buyer of immovable Properties.  May be in near future you are able to download your Form 16 or 16A also through this window.

To download form 16B, go to download, click on request for form 16B, validate details and submit your request.  After some time the same shall be available under download menu. Click on download, click on available and download and save it your computer.

Print, sign and deliver it to the seller.