Financial Health

A description of the state of a person or company's finances. Someone with good financial health usually deals well with their finances, makes their payments on time, and knows how to manage their money. Someone in poor financial health usually owes a lot of money and isn't making their payments on time.

No TDS on sum paid to banks for utilization of credit card facilities; they are in nature of bank charges & not commission

ITO V. JET AIRWAYS (INDIA) LTD (Mumbai - Trib.)
 
Payments to banks for utilization of credit card facilities are in nature of bank charges, and not commission, and, therefore, no tax is deductible at source from said payments under section 194H

In the instant case the assessee-company was engaged in the business of aviation, i.e., transportation of passengers and cargo by air. During assessment the AO held that assessee ought to have deducted tax at source on amounts retained by the banks in respect of air tickets booked through credit cards. The AO further stated that as per the agreement between the banks and the assessee, the banks were supposed to provide the assessee with the facility of their credit card internet payment gateway to enable the assessee to collect the payments made by the customers. Therefore, such payments were squarely covered by the definition of "commission or brokerage" as contemplated by section 194H. The CIT(A) reversed the order of AO. The aggrieved revenue filed the instant appeal.

The Tribunal held as under:

• Section 194H is applicable where any commission has been paid by the principal to the commission agent. The charges paid to the bank were not in the nature of commission payment but it was a fees charged by the bank for the services. The banks did not advise the assessee to sell their goods to its customers then he would pay them commission;
• The provisions of section 194H of the Act were not applicable as the banks were making payments to the assessee after deducting certain fees as per the terms and conditions in the credit cards and it was not a commission but a fee deducted by the banks;
• Payments made to the banks on account of utilization of credit card facilities would be in the nature of bank charges and not in the nature of commission within the meaning of section 194H of the Act and, hence, no TDS was required to be deducted under section 194H of the Act. Thus, the order of CIT(A) was to be upheld.

Commercial Bank

An institution which accepts deposits, makes business loans, and offers related services. Commercial banks also allow for a variety of deposit accounts, such as checking, savings, and time deposit. These institutions are run to make a profit and owned by a group of individuals, yet some may be members of the Federal Reserve System. While commercial banks offer services to individuals, they are primarily concerned with receiving deposits and lending to businesses.

Tiny pen drive enough to pin you down – ITAT accepts pen drive as admissible evidence in IT proceedings

CHETAN GUPTA V. ACIT (Delhi - Trib.)

Pen drive and print outs taken from it constituted admissible evidence in income-tax proceedings and formed a basis for investigation and additions

In the instant case the assessee was arrested by Punjab Police and pen drive was recovered from him containing details of his dealings, which was forwarded by police to IT Department with the printouts. The Assessing Officer reopened the assessment and cited the pen drive and printouts in reasons recorded. On appeal, the CIT(A) upheld the additions made by Assessing Officer. Aggrieved-assessee appealed to the ITAT and contended that that the pen drive was not an admissible evidence for reopening assessment and that various provisions of Cr. P.C., IPC, Indian evidence Act and Cyber Laws had been violated by Punjab Police during search.

The Tribunal held in favour of revenue as under:

1. Assessee’s objections had no effect on recordings of reasons by Assessing Officer for forming a belief about escapement. It is trite law that technical rules of Evidence Act and Cr. P. C. were not applicable to these proceedings; 
2. From the record it had emerged that many of the entries mentioned in the pen drive belonged to various business concerns of the assessee in which he was associated with in the capacity of director or partner; 
3. They were explained by the assessee though on a prejudicial basis, but the fact remained that the entries had correlation with assessee’s activities. Thus, the contents of the pen drive would become admissible evidence in Income Tax proceedings and would form a basis for investigations and additions. 
4. Consequently, pen drive and printouts thereof constituted admissible evidences in those proceedings. The reasons for reopening were recorded on the basis of those contents; 
5. The reasons recorded for escapement of income and the material available on record with Assessing Officer had a live link with each other. Thus, the reasons for reopening the assessments were properly recorded by Assessing Officer.

Admissions made during survey are not conclusive unless supported by convincing evidences

ACIT V. MAYA TRADING CO. (Agra - Trib.)

Addition on the basis of seized material was unjustified if assessee was able to show that the admissions made during survey were incorrect

In the instant case, during search and seizure operation on assessee-firm, the survey party worked out the certain value of excess stock by preparing a provisional trading account. The partners of assessee-firm, not being able to explain the excess stock, surrendered the same and agreed to pay tax on the value of excess stock. The excess cash found during survey was declared by the partners as income of firm other than regular income. The return filed after survey didn’t disclose the excess stock and excess cash found during survey. Consequently, the AO made addition for excess stock under section 69 and on account of excess cash under section 69A. The CIT(A), substantially reduced the addition made by the AO. Aggrieved by the order of CIT(A), revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

1. It is a well-settled law that admissions are not conclusive proof of the matter. They may be shown to be untrue or having been made under mistake of fact or law. Circumstances have to be seen under which same are made;
2. Admissions could be withdrawn unless it was conclusive. The Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18, had held that the assessee was to be given opportunity to show that admission was incorrect or didn’t show correct state of facts. The Punjab & Haryana High Court in the case of Kishan Lal Shiv Chand Rai v. CIT [1973] 88 ITR 293, had held that it was an established principle of law that a party was entitled to show and prove that admission made by it, was, in fact, not correct and true;
3. The sole basis of making addition, i.e., provisional trading account was not found to have correct figures of purchase and sales. Whatever items had been declared by the assessee on account of excess stock were correctly considered by the CIT(A). Since the figures of the sales and purchases were based on factual figures, it was a case of factual mistake committed by the Survey party as well as by the AO, which had been rightly corrected by the CIT (A);
4. Thus, the assessee on the basis of seized material had been able to show that the admission made at the time of survey, surrendering the additional income on account of excess stock was not correct and did not show correct state of facts. The CIT(A) correctly deleted the addition as no addition could be made against the assessee on the basis of mere admission. Therefore, the departmental appeal was to be dismissed.

Government Shutdown

The closure of all operations and services that are not considered essential by the US government. This occurs when a spending plan for the fiscal year cannot be agreed upon by the House of Representatives and the Senate. A shutdown causes many civilian federal employees to be furloughed until a funding bill is negotiated.

ITAT disallows sec. 54F exemption to the extent sum invested in construction before transfer of original asset

SMT. NIMMAGADDA SRIDEVI V. DY.CIT (Hyderabad - Trib.)

Investment made by assessee in new residential property was not entitled to deduction under section 54F to extent same was made before the sale of existing property

In the instant case, the assessee had filed its return for the relevant assessment year and had claimed deduction under section 54F in respect of amount invested in construction of a residential house property. During assessment, AO was of the view that the assessee was not entitled to deduction, as construction of house was substantially completed before the sale of capital asset. Therefore, the moot question that arose for consideration of the Tribunal was as under:

Whether the cost of construction incurred by the assessee after the sale of capital asset was entitled to deduction under section 54F, even if, the construction was commenced before the sale of capital asset and was completed within two years from the sale of capital asset?

The Tribunal held as under:

1. As per the ratio laid down by Karnataka High Court in the case of CIT v. J.R. Subrahmanya Bhatt [1986] 28 Taxman 578, the assessee was entitled to deduction under section 54F of the Act, though the assessee has commenced construction before the sale but completed the construction within two years after the sale. The commencement of construction prior to the sale of capital asset was immaterial and the assessee was entitled to deduction under section 54F of the Act;
2. In the case of Chandru L. Raheja v. ITO [1988] 27 ITD 551 (Bom.), it was held that when the assessee had already purchased land, started construction of a building then only that part of the investment in new house that was made out of the sale proceeds received after the transfer of the old house would qualify for exemption under section 54 of the Act;
3. The investment in residential house which had taken place after the sale of existing capital asset was to be considered only for deduction under section 54F;
4. Thus, whatever investment was made by the assessee in construction of new property within the period stipulated under section 54F, after the sale of existing property, would be entitled to deduction, but, the assessee was not entitled to deduction under sec. 54F in respect of the investment made in new property to the extent of investment made before the sale of existing property. Thus, the appeal of the assessee was partly allowed.