Pre-payment charges for closure of housing loan are eligible for section 24 deduction

WINDERMERE PROPERTIES (P.) LTD. V. DY. CIT (Mumbai - Trib.)

Prepayment charges for closure of loan account which was taken for acquisition of property are allowable under section 24(b)

In the instant case during the assessment, the AO disallowed the assessee's claim for deduction of prepayment charges on closure of housing loan. Further, the CIT (A) upheld the disallowance. Aggrieved assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

• The definition of interest under section 2(28A) makes it clear that it has basically two components, firstly, the amount of interest for moneys borrowed and secondly, the amount paid by whatever name called in respect of the money borrowed or debt incurred;
• The second category might also encompass any charges paid for not utilizing the credit facility. By incorporating the definition of 'interest' in section 24(b), the position that emerges is that not only the amount paid as interest but also any other amount paid, by whatever name, called, in relation to such debt incurred also qualifies for deduction;
• By early repayment, the assessee managed to wipe out its interest liability in respect of the loan, which would have otherwise qualified for deduction under section 24(b) during the continuation of loan;
• It was obvious that these prepayments had live and direct link with the obtaining of loan which was availed for acquisition of property. It was beyond comprehension as to how the amount paid as interest on the loan taken was allowable as deduction but the amount paid as prepayment charges of the very same loan was not deductible;
• The payment of such 'prepayment charges' couldn't be considered as de hors the loan obtained for acquisition or construction or repair, etc., of the property on which interest was deductible under section 24(b). Both, the direct interest and prepayment charges, were species of the term 'interest'. Therefore, the impugned order of CIT(A) was to be set aside and deduction claimed by the assessee was to be granted.

Tax Collection

As per the press release issued by the Government of India the gross direct tax collection during April-November of the financial year  2013-14 is at Rs.3,68,655 crores as against Rs.3,25,736 crores in the same period last year, up by 13.18%. While gross collection of Corporate taxes has increased by 9.66%  (Rs.2,25,124 crores as against Rs. 2,05,291 crores last year), gross collection of Personal income tax is up by 19.60% (Rs.1,39,763 crores as against Rs. 1,16,862 crores last year). Net direct tax collection is up by 14.60% and stands at Rs.3,10,317 crores, as compared to Rs. 2, 70,771 crores in the same period in the last fiscal.The collection of Securities Transaction Tax (STT) stands at Rs. 3,053 crores showing the growth of 4.73% . The Wealth Tax collection is up by 13.38% (Rs. 712 crores against Rs. 628 crores last year).

Special audit can be directed without providing an opportunity of personal hearing to assessee

NEESA LEISURE LTD. V. DY. CIT (Gujarat)

Proviso to section 142(2A) does not envisage any personal hearing to assessee before an passing of an order for special audit.

In the instant case the assessee-company was opposed to the proposal of special audit on the ground that there were no complexities in the accounts and contented that proviso to section 142(2A) provides an opportunity of personal hearing to assessee.

The High Court held as under:

• The requirement of personal hearing is normally not seen as necessary concomitant to a reasonable opportunity of being heard. The same depends on the statutory provisions from which such right flows, the nature of the proceedings and the consequences likely to follow from such proceedings;
• The proviso to section 142(2A) does not envisage any personal hearing before an order under sub-section (2A) can be passed. The said proviso only requires giving a reasonable opportunity of being heard to the assessee. Such reasonable opportunity ordinarily would not include right of personal hearing;
• It was strongly argued by assessee that the very fact that the AO believed that the accounts were complex, it meant that the issues were complex and the personal hearing was required. This contention was misconceived. Complexity of accounts and complexity of the question whether accounts were complex or not were two totally different things;
• Thus, a clear distinction had to be drawn between the two. Whether the accounts were complex so as to call for special audit was one aspect. Another aspect was whether the question to ascertain if the accounts were complex was itself a complex question. This would have a bearing on whether personal hearing was necessary. Thus, assessee’s contention of personal hearing was rejected;
• Coming to the question of validity of the order on the premise of complexity and the requirement of interest of revenue, it was noticed that the assessee had been given previous notice under section 142(1) with respect to its accounts. For a long time the assessee did not comply with such notices;
• The authorities had highlighted several aspects of the matter to indicate that the accounts were complex and that interest of revenue would be served if the special audit report was obtained. The various points on which the AO desired that the auditor should make a report itself would demonstrate that the accounts were complex;
• The AO had sufficient material at his command to form an opinion that the accounts were complex and that it was in the interest of the revenue to get them audited by the special auditor. Thus, there was no merit in instant petition and the same was to be dismissed.

Authority for Advance Rulings can only determine tax liability of an applicant and not any of its affiliates or AOP

CTCI Overseas Corporation Ltd., In re (AAR - New Delhi)

It would be impermissible for the authority ‘Authority for Advance Rulings’ (AAR) to determine tax liability of person other than the applicant

Facts

The applicant, a foreign company, formed a consortium with an Indian company to execute a project (i.e., ‘contract’) in India. The contract was awarded to the consortium. Under the contract, the applicant was responsible for offshore supplies, offshore services and the Indian company was responsible for onshore supplies, construction and erection. The applicant approached the AAR to determine the taxability of income receivable from offshore supplies made to Indian company. The AAR ruled that the applicant’s income from offshore supplies would not be taxable in India in view of the Supreme Court’s decision in Ishikawajima. Revenue filed an application for rectification of apparent mistake as the contract was awarded to consortium (AOP) and not to applicant, thus, ruling of AAR that applicant was not liable to be taxed was inconsistent with the finding that AOP was the assessing unit. The AAR allowed the rectification application of revenue and posted the application for main hearing as to whether AOP could be liable to be taxed in respect of offshore supplies?

Held

Section 245N of the Act doesn't permit AAR to rule on tax liability of a person other than the applicant. The AAR couldn’t give a ruling that the applicant was not liable to be taxed and somebody else would be liable to be taxed. The proposed question framed by AAR for determination could only relate to applicant's tax liability. It would be impermissible for AAR to determine tax liability of person other than the applicant (i.e., AOP).

Tribunal had no power to modify stay order which was merged with the order of High Court

CHOICE PRECITECH INDIA (P.) LTD. V. COMMISSIONER OF CENTRAL EXCISE (Bangalore - CESTAT)

Where stay order passed by Tribunal had been challenged before High Court, such order stood merged with order of High Court; thereafter, Tribunal had no power to modify such merged stay order

In the instant case, the Tribunal vide its stay order directed the assessee to make pre-deposit of certain amount and report compliance. Against the said order, the assessee filed writ petition before the High court. The High Court only allowed credit of earlier payments to be taken by the party towards pre-deposit ordered by the Tribunal. Further, the High Court granted four weeks time to deposit any balance amount and submit proof thereof to the Registry of the Tribunal. In these circumstances the assessee again filed a miscellaneous application to the Tribunal seeking modification of the stay order.

The Tribunal rejected the application with following observations:

• The plea made by assessee in miscellaneous application amounted to a plea for modification of original stay order which had already merged with the order of High Court;
• The Tribunal was incompetent to modify the stay order. The assessee had not complied with the time-bound direction of the High Court either. There was neither clear statement of any payments made by the assessee, nor there was any claim of further payments within the prescribed time towards pre-deposit ordered by the Tribunal;
• In the above scenario, the miscellaneous application was rejected.

Extension of due date of advance tax -December instalment

The government today extended the last date for payment of the December instalment of advance tax from December 15 to December 17.

"The banks are closed on December 15, 2013, being a Sunday. Accordingly, to facilitate payment of this instalment of Advance tax, the Central Board of Direct taxes ( CBDT) has issued an order to extend the time limit to make such payments from December 15, 2013 to December 17, 2013," the Finance Ministry said.

Taxpayers, therefore, can now pay their advance tax instalment by December 17, 2013 without entailing any consequential interest for deferment, it added.

The government today extended the last date for payment of the December instalment of advance tax from December 15 to December 17.

"The banks are closed on December 15, 2013, being a Sunday. Accordingly, to facilitate payment of this instalment of Advance tax, the Central Board of Direct taxes ( CBDT) has issued an order to extend the time limit to make such payments from December 15, 2013 to December 17, 2013," the Finance Ministry said.

Taxpayers, therefore, can now pay their advance tax instalment by December 17, 2013 without entailing any consequential interest for deferment, it added. Taxpayers, therefore, can now pay their advance tax instalment by December 17, 2013 without entailing any consequential interest for deferment, it added.

Read more at:
http://economictimes.indiatimes.com/articleshow/27308288.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

The government today extended the last date for payment of the December instalment of advance tax from December 15 to December 17.

"The banks are closed on December 15, 2013, being a Sunday. Accordingly, to facilitate payment of this instalment of Advance tax, the Central Board of Direct taxes ( CBDT) has issued an order to extend the time limit to make such payments from December 15, 2013 to December 17, 2013," the Finance Ministry said.

Taxpayers, therefore, can now pay the ..

Read more at:
http://economictimes.indiatimes.com/articleshow/27308288.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

The government today extended the last date for payment of the December instalment of advance tax from December 15 to December 17.

"The banks are closed on December 15, 2013, being a Sunday. Accordingly, to facilitate payment of this instalment of Advance tax, the Central Board of Direct taxes ( CBDT) has issued an order to extend the time limit to make such payments from December 15, 2013 to December 17, 2013," the Finance Ministry said.

Taxpayers, therefore, can now pay the ..

Read more at:
http://economictimes.indiatimes.com/articleshow/27308288.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Books of account pre-requisites to tax unexplained cash credit; no additions for deposit in bank account in absence of books

ITO V. KAMAL KUMAR MISHRA (Lucknow - Trib.)

Where assessee has not maintained any books of account, Assessing Officer can’t invoke provisions of section 68 on the basis of deposits made in bank account of assessee.

In the instant case, the assessee had not maintained any books of account. During assessment, the AO invoked the provisions of section 68 and made additions of all the deposits made by assessee in his bank account. The assessee, however, contended that the provisions of section 68 could only be invoked where any sum was found credited in his books of account. On appeal, the CIT (A) deleted the additions. Aggrieved-revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

1. The provisions of section 68 can only be invoked if any sum is found credited in the books of account maintained by assessee and the assessee offers no explanation about the nature and source thereof or the explanation offered by him isn’t, in the opinion of the Income-tax Officer, satisfactory. In this eventuality, the said sum so credited may be charged to income-tax as the income of the assessee of that previous year;
2. The passbook issued by the bank can’t be termed to be the books of account of the assessee as per the judgment of the Bombay High Court in CIT v. Bhaichand N. Gandhi [1982] 11 Taxman 59. Therefore, the provisions of section 68 can’t be invoked on various deposits or credits found in the bank account of the assessee in the absence of any books of accounts maintained by assessee for the previous year;
3. Though provisions of section 68 couldn’t be invoked on the deposits made in the bank account of the assessee, yet the veracity of the additions made by the AO on certain deposits by invoking the provisions of section 68 examined and the assessee had furnished reasonable and plausible explanations along with confirmation with regard to different deposits. Thus, there was no infirmity in the order of CIT(A).