Foreign tax credit should be given on tax liability computed under MAT provisions

 Dy.CIT v. Subex Technology Ltd. [2015] 63 taxmann.com 124 (Bangalore - Tribunal)

 

The issue that was disputed in the instant case was as under:

“Whether relief under section 90 of Income-tax Act(‘the Act’) in respect of tax paid in a foreign country would be available while computing tax liability under as per provisions of MAT ?.”


The Tribunal held in favour of assessee as under:

• The Mumbai Tribunal in case of ACIT v. L&T Ltd. (in ITA No.4499/Mum/2008/ dated 22-04-2009) had held that once taxable income was determined either under the normal provisions of the Act or as per Sec 115JB, subsequent portion relating to rebate and set-off would be governed by the normal provision of the Act.
• There is no provision in the Act, debarring granting of credit for tax paid abroad in case income is computed under section 115JB. Thus, assessee could not be denied set off of tax relief under section 90 against the tax liability determined under section 115JB.

Booking rights of fictional property not to be deemed as transferable capital assets issue

S. NARENDRAKUMAR & CO. V. DCIT [2015] 63 taxmann.com 184 (Mumbai - Tribunal)

Whether booking of a property which was neither in existence nor its building plan or specifications were approved from the Municipal Corporation would be treated as transferable capital assets?

 

The tribunal held as under:-

• Rights in property could be considered as transferable capital asset. However, for that purpose, there should be a property in existence or there should be a property which is likely and apparently coming into existence, e.g., if the construction of the flat is started and the flat is likely to come in existence. However, when there is no property in existence nor any definite process for its creation has started, no one get a transferable right or interest into such a fictional property which itself cannot be said to be even a “property”.
• In the instant case payment was made to the builder when neither the property was in existence nor its building plan or specifications were approved from the Municipal Corporation and neither any construction activity nor commencement of the project had started. Therefore, any gain arising on transfer of booking rights in such fictional property should be taxed under the head ‘income from other sources’ and not as capital gains.

Supreme Court draws distinction between exempted goods and exempted units for allowing input tax credit

Commercial Taxes Officer v. A Infrastructure Ltd. [2015] 63 taxmann.com 307 (Supreme Court)

CST & VAT: Rajasthan VAT- Assessee could claim input tax credit of raw material used in manufacturing of Asbestos Cement Sheets when assessee was specifically exempted from paying VAT due to exemption notification.

Facts:

• Assessee was manufacturing Asbestos Cement Pressure Pipes and Asbestos Cement Sheets (A.C. Sheets). It had availed input tax credit (ITC) on purchase of raw material used in manufacturing of A.C. Sheets.
• Revenue disallowed such ITC on the ground that no tax was required to be paid by assessee due to exemption notification. However, the assessee was of the view that it was only exempted to pay duty by virtue of notification and goods manufactured by it were not exempted goods. Therefore, it was correct in claiming ITC.
• The High Court held in favour of assessee.Aggrieved-department filed the instant appeal.

The Apex Court held in favour of assessee as under:

• It was perceivable that the High Court had proceeded on foundation that there was distinction between the exempted units and exempted sales. If said distinction would be overlooked, it might lead to serious error in construction and application of taxing provisions.
• There is no doubt that distinction has to be drawn between exempted goods, which means complete exemption for the specified goods, and when the goods are taxable goods, but a transaction or a person is granted exemption.
• When goods are exempt, there would be no taxable transactions or exemption to a taxable person. In other cases, goods might be taxable, but exemption could be given in respect of a taxable event, i.e., exemption to specified transactions from liability of tax or exemption to a taxable person, though the goods are taxable. Exemption with reference to taxable events or taxable persons would not exempt the goods as such, for a subsequent transaction or when the goods are sold or purchased by a non-specified person, the subsequent transaction or the taxable person would be liable to pay tax.
• Therefore, the appellant though exempted from payment of tax, subsequent transactions of sale of asbestos cement sheets would be taxable. As a logical corollary it follows that the VAT would have to be paid on the taxable goods in a subsequent transaction by the purchasing dealer.
• The denial of credit to assessee would lead assessee to a disadvantageous position as if subsequent sale is made by non-exempted dealer then it would suffer tax on entire sale consideration. It would make its products uncompetitive in spite of exemption notification. Thus, assessee had correctly claimed ITC.

Valuation of DTA clearances of 'tea' by EOU to be valued as per Excise law

Commissioner of Central Excise v. Nestle India Ltd. [2015] 63 taxmann.com 312 (Supreme Court)

Central Excise: Where, as per exemption notification, DTA clearances by EOU are liable to excise duty equal to duty on clearances by non-EOUs, said DTA clearances are to be valued as per Central Excise Valuation rules.

Facts:

• Assessee was a 100% EOU engaged in manufacture of instant tea. It cleared tea manufactured wholly out of indigenous raw materials, to its sister concerns in EOU.
• Since, as per Notifications 8/97 and 23/2003, said clearance of tea was liable duty equal to ‘excise duty’ and any excess was exempted, assessee valued said tea as per rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.
• Department argued that since DTA clearances by EOU are liable to excise duty equal to ‘customs duty leviable’, tea was to be valued as per customs law.
• Tribunal decided in favour of assessee and aggrieved department filed civil appeal in Apex Court.

Apex Court decided in favour of Assessee as under:

• There is no doubt that the duty of excise leviable under Section 3 would be on the basis of the value of like goods produced or manufactured outside India as determinable in accordance with the provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975. However, the notification states that duty calculated on the said basis would only be payable to the extent of like goods manufactured in India by persons other than 100% EOUs.
• It is clear that in the absence of actual sales in the wholesale market, when goods are captively consumed and not sold, Rule 8 of the Central Excise Rules would have to be followed to determine what would be the amount equal to the duty of excise leviable on like goods.
• It is also clear that the said notification has been framed by the Central Government, in its wisdom, to levy only what is levied by way of excise duty on similar goods manufactured in India, on goods produced and sold by 100% EOUs in the domestic tariff area if they are produced from indigenous raw materials.
• Therefore, DTA clearances by assessee are rightly valued as per Central Excise Valuation rules. Appeal is, accordingly, dismissed.

Indirect Tax Collections up to September, 2016 show an increase of 25.9%

The figures for indirect tax collections (Central Excise, Service Tax and Customs) up to September 2016 in the current Financial Year 2016-17 show that net revenue collections are at Rs 4.08 lakh crore which is 25.9% more than the net collections for the corresponding period last year i.e. 2015-16. Till September 2016, 52.5% of the Budget Estimates of indirect taxes for Financial Year 2016-17 has been achieved.

As regards Central Excise, net tax collections stood at Rs.1.83 lakh crore during April-September, 2016 as compared to Rs.1.25 lakh crore during the corresponding period in the previous Financial Year, thereby registering a growth of 46.3%.

Net Tax collections on account of Service Tax during April-September, 2016 stood at Rs. 1,16,975 crore as compared to Rs. 95,780 crore during the corresponding period in the previous Financial Year, thereby registering a growth of 22.1%.

Net Tax collections on account of Customs during April-September 2016 stood at Rs. 1.08 lakh crore as compared to Rs. 1.03 lakh crore during the same period in the previous Financial Year, thereby registering a growth of 4.8%.

CASH CREDIT

CASH CREDIT 

[2016] 74 taxmann.com 16 (Gujarat)

Accommodation entries: Where Assessing Officer had no material to suggest that assessee company had received accommodation entries against cash receipts, notice for reopening assessment based on such reasons was completely wrong and had to be set aside.

No need to deposit in Capital Gain Scheme if house is purchased within time limit of section 54F

Ashok Kapasiawala v. ITO [2015] 63 taxmann.com 284 (Ahmedabad - Tribunal)
Issue:
 

Whether exemption under Section 54F could be denied to assessee who had purchased a new residential house within 2 years from the date of transfer of original asset on ground that he had not deposited the amount in capital gain account scheme before the due date of filing of return under section 139(1)


The tribunal held in favour of assessee as under-

• A combined reading of sections 54F(1) and 54F(4), makes it clear that the assessee would be entitled to exemption under section 54F in the event he purchases new asset within two years from the date of transfer of original asset or the amount is utilized before the date of furnishing the return under section 139. In a case it is not utilized for the purpose of aforesaid and within the period aforementioned, section 54F(4) mandates the assessee to deposit such amount in capital gain account scheme before due date of filing of return under section 139(1).
• Therefore, there is no ambiguity in the provision; so far deposit of the unutilized amount is concerned, it has to be deposited in a specified capital gain account before the due date of filing of return under section 139(1).
• In the instant case, the return was filed by assessee in response to a notice issued under Section 148 and not under section 139(1). Therefore, the contention of the assessee was that he should be allowed exemption under section 54F even if had not deposited the amount in capital account scheme.
• The Karnataka High Court in the case of CIT v. K. Ramachandra Rao [2015] 56 taxmann.com 163 held that when the assessee had invested the entire sale consideration in construction of a residential house within the three years from the date of transfer, he could not be denied exemption under section 54F on the ground that he did not deposit the said amount in capital gain account scheme before the due date prescribed under section 139(1).
• Under section 54F (1), the exemption would be available if the assessee purchased the residential house within two years after the date when transfer took place. Hence, as per judgment of Karnataka High Court, the provisions of section 54F(4) would not be attracted if assessee has purchased or constructed the residential house within period prescribed under section 54F(1).
• In the instant case, there was no dispute with regard to the fact that the assessee had purchased a new asset within two years from the date of transfer of the original asset. Therefore, following the ratio laid down by the Karnataka High Court in the case of K. Ramachandra Rao (supra), the court directed Assessing Officer to re-compute the assessed income after granting the benefit of section 54F to the assessee.