Credit of foreign TDS can't be denied even against tax levied on corresponding income eligible for section 10A relief

BLUE STAR INFOTECH LTD. V. ACIT [2015] 57 taxmann.com 386 (Mumbai - Tribunal)

Assessee qualified for tax relief under article 23 of DTAA between India and Japan in respect of income that has been subjected to tax in Japan even if such income was exempt in India under Section 10A

Facts

• The assessee filed its return wherein credit of tax deducted at Japan was claimed in respect of its income covered under Section 10A.
• The Assessing Officer (AO) rejected assessee's claim holding that the income on which the assessee was charged to tax in Japan was not chargeable to tax in India being exempt under the provisions of section 10A and, therefore, assessee was not eligible to claim credit for the tax deducted in Japan.
• On appeal, Order passed by AO was confirmed by CIT(A). Aggrieved by the order of CIT(A), assessee filed the instant appeal before the tribunal.

The Tribunal held in favour of assessee as under:

• The profits and gains to which the provisions of section 10A apply are not excluded from total income and instead 'a deduction of such profits and gains…..' shall be allowed from the total income of the assessee. It means 'total income' must first be determined from which deduction under section 10A shall be allowed. Therefore, it could not be said that the profits and gains to which section 10A applies are not charged to tax in India.
• As income that has been subjected to tax in Japan was also chargeable to tax in India (although exempted under Section 10A), assessee was qualified for tax relief under article 23 of DTAA between India and Japan.

Service Charges Collected by Restaurants/Hotels/Eateries Retained by the Restaurants/Hotels/Eateries and are Not ‘Service Tax’ Imposed by the Government

Some restaurants/hotels/eateries besides charging for the food and beverages are also charging ‘service charges’ in their bills. The proceeds of the ‘service charges’ are retained by the restaurants/hotels/eateries. 

Some of the consumers have a misapprehension that these ‘service charges’ are being collected by the restaurant on behalf of the Government as tax. 

It is clarified that these ‘service charges’ collected by the restaurants/hotels/eateries are retained by the restaurants/hotels/eateries and are not ‘service tax’ imposed by the Government. 

It is further clarified that effective service tax rate in respect of services provided in relation to serving of food or beverage by a restaurant, eating joint or mess having the facility of air–conditioning or central air-heating in any part of the establishment is 5.6% (14% of 40%) of the total amount charged.

No denial of section 11 relief to hospital just because it didn't provide concessional treatment to poor patients

ITO V. NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE [2015] 57 taxmann.com 333 (Pune - Tribunal)

Section 11 exemption could not be denied to a hospital on the ground that it didn’t provide concessional treatment to poor patients as there is no provision under Income-tax Act which would disentitle assessee to claim exemption on this ground.

Facts:

• Assessee-trust, running a multi-specialty hospital, claimed exemption of income under section 11 of the Income-tax Act (‘Act’).
• Assessing Officer (AO) denied exemption on ground that assessee was earning profit from its activity and it had failed to provide concessional treatment to poor patients.
• On appeal, the CIT(A) reversed the findings of the AO and allowed exemption to the assessee. Aggrieved by the order of CIT(A), the AO filed the instant appeal before the Tribunal.

The Tribunal held in favour of assessee as under:

• The CBDT in its Circular No. 11, dated 19-12-2008 had clarified that where the purpose of trust or institution is relief to the poor, education or medical relief, it would constitute charitable purpose, even if it incidentally involves carrying on the commercial activities
• In the instant case, assessee was engaged in carrying on objects of providing medical relief to people at large which has been recognised as charitable activity under the Act. Therefore, exemption under section 11 could not be denied merely because surplus was generated from such activities
• Further, there is no provision under the Act which would disentitle assessee to claim exemption on the ground that it did not provide concession to poor patients and, therefore, this could not be a ground to disallow exemption under section 11.

e-Verification of Income Tax Returns – User Manual

CBDT vide Notification No. 2/2015 prescribes  Electronic Verification Code (EVC) for electronically filed Income Tax Return as an alternative mode of verification. EVC would verify the identity of the person furnishing the return of income. 

The Manual Covers   e-Verification of Income Tax Returns in following Circumstances and provides 3 to 4 Option in each such Circumstances.

1.  e-Verification while uploading a return (Non – NetBanking)

2.  e-Verification of an already uploaded return (Non – NetBanking)

3.  e-Verification while uploading a return through NetBanking Login

 

1.  e-Verification while uploading a return (Non – NetBanking)

1 Upload Return – Click Submit

2 The Return is uploaded (Pending for e-Verification)

3 Four e-Verification options provided – Taxpayer can choose any one of the options provided to e-Verify the return.

• Option-1 – “I already have an EVC and I would like to Submit EVC”
• Option-2 – “I do not have an EVC and I would like to generate an EVC”
• Option-3 – “I would like to generate Aadhaar OTP to e-Verify my return”
• Option-4 – “I would like to e-Verify later! I would like to send ITR-V”

Option 1 – “I already have an EVC and I would like to Submit EVC”

Step 1: Provide the EVC in the text box – Click Submit.

Step 2: Download the Acknowledgement (No Further action required).

Option 2 – “I do not have an EVC and I would like to generate an EVC”

Two options are provided – Taxpayer can choose any one of the options if they do not have an EVC

i. Generate EVC through NetBanking.

ii. Generate EVC to registered Email Id and Mobile Number.

Generate EVC through NetBanking:

Step 1: Login to e-Filing Portal through NetBanking. Step 2: Click on e-Verify return.

Generate EVC to registered Email Id and Mobile Number:

Step 1: Enter the EVC sent to your registered Email Id ! Mobile Number and Submit to e-Verify return.

Step 2: Download the Acknowledgement (No Further action required).

Option 3 – “I would like to generate Aadhaar OTP to e-Verify my return”

Pre-requisite: Taxpayer’s PAN and Aadhaar should be linked.

If Aadhaar is not linked, click on Link Aadhaar button and link the Aadhaar.

Step 1: Enter the Aadhaar OTP sent to your Mobile Number registered with Aadhaar and Submit to e-Verify return.

Step 2: Download the Acknowledgement (No Further action required).

Option 4 – “I would like to e-Verify later! I would like to send ITR-V”

Step 1: Click on Continue -> Download ITR-V

Step 2: Submit ITR-V to CPC, Bangalore.

 

2.  e-Verification of an already uploaded return (Non – NetBanking)

1 Click e-Verify Return under e-file.

2 Uploaded returns (120 Days) which are yet to be e-Verified are displayed in a table.

3 Click on e-Verify (for the return already uploaded)

4 Three e-Verification options provided – Taxpayer can choose any one of the options provided to e-Verify the return.

• Option-1 – “I already have an EVC and I would like to Submit EVC”
• Option-2 – “I do not have an EVC and I would like to generate an EVC”
• Option-3 – “I would like to generate Aadhaar OTP to e-Verify my return”

Option 1 – “I already have an EVC and I would like to Submit EVC”

Step 1: Provide the EVC in the text box – Click Submit.

Step 2: Download the Acknowledgement (No Further action required).

Option 2 – “I do not have an EVC and I would like to generate an EVC”

Two options are provided – Taxpayer can choose any one of the options if they do not have an EVC

i. Generate EVC through NetBanking.

ii. Generate EVC to registered Email Id and Mobile Number.

Generate EVC through NetBanking:

Step 1: Login to e-Filing Portal through Ne Banking. Step 2: Click on e-Verify return.

Generate EVC to registered Email Id and Mobile Number:

Step 1: Enter the EVC sent to your registered Email Id / Mobile Number and Submit to e-Verify return.

Step 2: Download the Acknowledgement (No Further action required).

Option 3 – “I would like to generate Aadhaar OTP to e-Verify my return”

Pre-requisite: Taxpayer’s PAN and Aadhaar should be linked.

If Aadhaar is not linked, click on Link Aadhaar button and link the Aadhaar.

Step 1: Enter the Aadhaar OTP sent to your Mobile Number registered with Aadhaar and Submit to e-Verify return.

Step 2: Download the Acknowledgement (No Further action required).

 

3.  e-Verification while uploading a return through NetBanking Login

1 Login to e-Filing through NetBanking

2 Upload Return -> Click Submit

3 The Return is uploaded (Pending for e-Verification)

4 Three e-Verification options provided – Taxpayer can choose any one of the options provided to e-Verify the return.

• Option-1 – “I would like to e-Verify my return now”
• Option-2 – “I would like to generate Aadhaar OTP to e-Verify my return”
• Option-3 – “I would like to e-Verify later! I would like to send ITR-V”

Option 1 – “I would like to e-Verify my return now”

Step 1: Click on “I would like to e-Verify my return now” -> Click Continue

Step 2: Download the Acknowledgement (No Further action required).

Option 2 – “I would like to generate Aadhaar OTP to e-Verify my return”

Pre-requisite: Taxpayer’s PAN and Aadhaar should be linked.

If Aadhaar is not linked, click on Link Aadhaar button and link the Aadhaar.

Step 1: Enter the Aadhaar OTP sent to your Mobile Number registered with Aadhaar and Submit to e-Verify return.

Step 2: Download the Acknowledgement (No Further action required).

Option 3 – “I would like to e-Verify later! I would like to send ITR-V”

Step 1: Click on Continue – Download ITR-V

Step 2: Submit ITR-V to CPC, Bangalore.

Note: User who has already uploaded the return and opts to e-Verify the existing return can use the above mentioned options other than Option 3.

How to e-file return using EVC without sending signed copy of ITR-V?

Taxpayers filing return of income electronically (without digital signatures) are required to send the signed copy of ITR-V acknowledgement to the CPC, Bengaluru within 120 days of uploading the return. From the Assessment Year 2015-16, an option is given to the taxpayer to file return of income via ‘Electronic Verification Code’ (‘EVC’). In that case, taxpayers shall not be required to send the signed copy of ITR-V to CPC, Bengaluru.

The procedures and modes of filing of return through EVC has been notified by the CBDT. Thus, taxpayers can now file their return without worrying about sending copy of ITR-V acknowledgment to the CPC, Bengaluru. The new procedure is as under:

I. Verification of person via EVC

EVC means a code generated for the purpose of electronic verification of the person furnishing the return of income. EVC will be a unique number linked to assessee’s PAN. It cannot be used for filing return of income of any other PAN. One EVC can be used to validate one return, irrespective, of assessment year or type of return.

EVC generated via Adhaar Card will be valid only for 10 minutes and in any other case, it will be valid for 72 hours.

II. Who cannot file return via EVC?

• Persons, whose accounts are required to be audited under Section 44AB;

• Political parties filing their return of income in ITR-7; and

• Companies.

III. Modes of generating EVC

Taxpayers can generate EVC by any of the four modes specified hereunder:

• Through Net-Banking : Banks registered with Income-tax Dept.are providing direct access to the e-filing website to their account holders. By clicking on e-filing option account holder will be redirected to the e-filing website where he can generate the EVC using “e-File” menu.

EVC generated will be sent to the registered e-mail id and mobile number of taxpayer, which can be used to verify income-tax return.

• Through Aadhaar Number : Taxpayers can link their Aadhaar Number with their PAN on e-filing website to generate the EVC. Aadhaar Number can only be linked if the PAN database (i.e., name, DOB and gender) are similar to data available with UIDAI for his Aadhaar number.

Once the Aadhaar Number is linked to PAN, ‘one time password’ (‘OTP’) will be generated by UIDAI and sent to the taxpayer’s mobile number registered with UIDAI. This Aadhaar based OTP will be the EVC and can be used to verify the income-tax return.

• Through ATM : All taxpayers can generate EVC through ATM only if ATM card of taxpayer is linked to PAN validated bank account and bank is also registered with the Income-tax department. Taxpayer can access ATM of registered bank using his Debit/Creditcard andthereafter he/she needs to selectoption of “Generate EVC for Income Tax Return Filing” on ATM screen. The bank will communicate this request to e-filing website which will generate EVC and send the EVC to assessee on his registered mobile number.

• Through E-filing Website of Income-tax Dept. : Assessee can also generate EVC by using e-filing website of Income-tax Dept. (i.e., www.incomeindiaefiling.gov.in). However, this facility is available only to the assessee’s having total income of Rs. 5 Lakhs or below and who are not claiming Income-tax refund. To use this facility, assessee can visit the e-filing website and select the option ‘Generate EVC’ from e-File menu. EVC generated will be sent to the registered email ID and mobile number.

Clearances of intermediate parts by job-worker to its principal has to be valued as per general rule of valuation

Commissioner of Central Excise, Pune v. Mahindra Ugine Steel Co. Ltd. (2015) 57 taxmann.com 299 (Supreme Court)

Clearances of 'motor vehicles parts' manufactured by job-worker for use in manufacture of 'motor vehicles' by principals, would be valued as per rule 11 and valuation rules 8 and 9 cannot apply thereto.

• Assessee, a job-worker, was manufacturing motor vehicle parts for use by principal in manufacture of motor vehicles
• Assessee and principal were related in terms of section 4(3)(b)(i) viz. interconnected undertaking.
• Department sought valuation of 'parts' under rule 8 or proviso to rule 9 as captively consumed goods.
• Assessee claimed valuation as per rule 11 at 'cost of materials plus job-work charges' treating assessee/job-worker's premises as deemed factory gate.

Supreme Court held in favour of assessee as under:

• Since parts were not captively consumed by assessee-jobworker or on his behalf in production or manufacture of other articles, hence, rule 8 was inapplicable.
• Rule 9 and consequently, proviso to rule 9, was inapplicable Since assessee and principal were interconnected undertaking related in terms of section 4(3)(b)(i). This is because rule 9 mentions relationship that is visualised in sub-clauses (ii) to (iv) only and excludes clause (i). Further, since main rule 9 is not attracted, question of applicability or proviso thereto does not arise.
• Once it was concluded that above rules is not applicable in the case of the assessee, it is rule 11 only which becomes applicable as that is residuary provision for arriving at the value of any excisable goods which are not determined under any other rule.

Even refund of excess self-assessment tax paid by assessee would be entitled to interest

CIT V. PUNJAB CHEMICAL & CROP PROTECTION LTD. [2015] 57 taxmann.com 283 (Punjab & Haryana High Court)

Assessee would be entitled to interest under section 244A(1)(b) on amount of refund which was deposited by it by way of self-assessment tax under section 140A

The issue that arose before the High Court was as under: 

Whether assessee was entitled to interest on the amount of refund arising due to excess self-assessment tax paid by it?

The Punjab and Haryana High Court held in favour of assessee as under-

• Section 244A deals with the grant of interest on refund of any amount of tax which becomes due to the assessee in terms of the provisions of Act. 
• Clauses (a) and (b) of sub-section (1) of section 244A deal with two different situations. Clause (a) deals with refund of taxes which have been paid under section 115WJ or collected at source under section 206C or paid by way of advance tax or treated as paid under section 199. Clause (b) deals with refund of taxes in any other case.
• It was clear that assessee’s case would not fall under clause (a) of section 244. However, revenue contends that cause (b) is confined to situations where the tax refund has been paid in terms of a notice of demand issued by the Assessing Officer under section 156.
• It was held that once self-assessment tax so paid gets adjusted against the tax determined by the Assessing Officer upon assessment, it takes the imprint of a tax paid in pursuance notice of demand issued under section 156.
• Section 244A was inserted in the statute as a measure of rationalization to ensure that the assessee is duly compensated by the Government, by way of payment of interest for monies legitimately belonging to the assessee and wrongfully retained by the Government.
• The tax deducted at source, advance tax and also tax paid by way of self-assessment, after its adjustment in the tax liability of the assessee loses its original character and becomes tax paid in pursuance of the liability. Therefore, assessee was entitled to interest under section 244A(1)(b) on excess self-assessment tax paid by it.

Note:

Even after this verdict this issue is not resolved as judiciary differs on this issue. The Delhi High Court in the case of CIT v. Engineers India Ltd.[2015] 55 taxmann.com 1 (Delhi) denied to grant interest on excess self-assessment tax paid by assessee.