The Income Declaration Scheme, 2016 - Reserve Bank of India(RBI) requested to issue instructions to banks to allow payment of tax under the Scheme in cash and to allow deposit of cash over the counter.

The Income Declaration Scheme, 2016 provides an opportunity to persons who have not paid full taxes in the past to come forward and declare their undisclosed income and assets. The Scheme has come into effect from 1.6.2016 and is open for declarations upto 30.9.2016.

In respect of the issue of deposit of cash declared under the Scheme, the Central Board of Direct Taxes (CBDT) vide Circular No.29 of 2016 dated 18.8.2016 clarified that Reserve Bank of India (RBI) has been requested to issue instructions to banks to allow payment of tax under the Scheme in cash and to allow deposit of cash over the counter.

The RBI has vide its circular dated 08.09.2016 instructed the banks to invariably accept cash deposits from all the declarants under the Scheme and to accept cash deposits, irrespective of amount, over the counters, for making payment under the Scheme through challan ITNS-286.

The relevant circular of RBI is available on the departmental website www.incometaxindia.gov.in

Income initially disclosed before SetCom couldn't be said to be concealed if additions were made due to TP provisions

CIT v. Income Tax Settlement Commission [2016] 65 taxmann.com 40 (Bombay High Court)

Where correct determination of income was dependent upon application of appropriate transfer pricing rule and, consequently, assessee made a revision in income initially disclosed before SetCom after considerable debate during the course of hearing, it could not be said that full and true disclosure of undisclosed income was not made in original application filed before SetCom.

Issue:

Whether income initially disclosed before SetCom could be said to be concealed if additions were made due to transfer pricing provisions?

The High Court held in favour of assessee as under-

• Normally, income offered for tax in an application made before settlement commission binds the parties concerned and any revision thereof, would prima facie, is deemed as evidence of the fact that full and true disclosure of undisclosed income was not made in original application. However, this is not cast in stone and depends upon the factual context of each case.
• In the instant case, the correct determination of income was dependent upon the application of the appropriate transfer pricing rule which to an extent is subjective and, consequently, additional income was declared by assessee after a considerable debate over the transfer pricing provisions during the course of hearing before SetCom.
• Therefore, assessee found to be made a bonafide disclosure in original application and it could not be said that income was not truly and fully disclosed by assessee

Penalty levied on company as its directors tried to evade service tax with help of internal auditors

ITL Tours & Travels (P.) Ltd. v. Commissioner of Service Tax, Mumbai [2016] 65 taxmann.com 25 (Mumbai - CESTAT) 

Where internal auditor of company perpetrated fraud by booking 'service tax due' as 'income'/'commission' in books of account and it was found that directors of company were aware thereof, company was liable to evasion penalty for consequent non-payment of service tax 

FACTS 

• Assessee was engaged in the activity of issuing Air Tickets for Domestic as well as International routes to its customers. It discharged Service Tax liability based on the basic fare charged by the Airlines.
• Department noticed that assessee had failed to discharge the Service Tax at appropriate rate and has also failed to file ST-3 returns correctly. It issued show-cause notice to assessee after invoking extended period and imposing interest and penalties.
• Assessee argued that its Consultant and internal auditor Shri P.K. Agarwal mis-guided and cheated it while discharging the Service Tax liability. Therefore, waiver of penalty was sought before CESTAT. 

CESTAT HELD IN FAVOUR OF REVENUE AS UNDER : 

• It is undisputed that the assessee has discharged the Service Tax liability and interest thereof on being pointed out. But their consultant submitted that it was duly informed to the management or the Managing Partner about the liability towards Service Tax and said amount was transferred to Commission Account because otherwise company's profit would be in minus.
• He also submitted before department that it was done with the consent of the management and I had not personally effected any changes. Therefore, as per given circumstances and facts of the case, penalty has to be levied on company.

Sale of 100% shareholding in subsidiary company could not be treated as 'Slump Sale'

Facts

• The assessee-company sold its entire shareholding in its subsidiary comapany 'UHEL' to a third party.
• Assessee worked out capital gains under section 48 on such transaction.
• The Assessing Officer(‘AO’) opined that the said transaction would amount to slump sale of an undertaking and capital gains had to be computed under section 50B.
• The Commissioner (Appeals) upheld the order of Assessing Officer.
• Aggrieved-assessee filed the instant appeal before the Tribunal.

Held

• As per section 2(42C),transfer of shares will not result into transfer of undertaking making it a slump sale for section 50B.
• If impugned transaction would be regarded as slump sale, the consideration should have been received by UHEL, and not by the assessee because it was UHEL which had been transferred and being a distinct legal entity it was entitled for the sale consideration on its transfer. However, this was not the case since the sales consideration was received by assessee on transfer of shares of UHEL.
• What the assessee had transferred was the shares in UHEL and this transfer of shares could not be considered as slump sale of an undertaking within the provisions of section 2(42C).

[2016] 65 taxmann.com 161 (Mumbai - Tribunal)