Overview of NFRA Inspection Reports of 2023 on Audit Firms– II

Recycling Of Wastes – An Accounting Conundrum?

From Published Accounts

Accounting Of Losses in an Associate

NFRA Digest

Allied Laws

Decoding Residential Status Under FEMA

Part A : Company Law

Direct Listing of Indian Companies On International Exchanges

Section 43B(h) – The Provisions And Debatable Issues

Revision under Section 264 of Intimation Issued Under Section 143(1)

Glimpses of Supreme Court Rulings

Fees for technical services — Make available — Meaning of — Recipient of services should apply technology — Services offered to Indian affiliates — Tribunal holding services to Indian affiliates not fees for technical services as make available test not fulfilled — Agreement between assessee and its affiliate effective for long period — Recipient of services unable to provide same service without recourse to service provider — Not fees for technical services: DTAA between India and Singapore s. 12(4)(b).

Offences and prosecution — Failure to deposit tax deducted at source before due date — Sanction for prosecution — Reasonable cause — Tax deducted at source — Delay to deposit tax deducted at source due to prevalence of pandemic — Assessee depositing tax deducted at source in phased manner with interest though after due date — Reasonable cause for failure — Prosecution orders set aside.

Offences and Prosecution — Wilful attempt to evade payment of tax — Self assessment tax shown in the return of income but paid late — Penalty levied for delayed payment of tax — Criminal intent of assessee essential — Nothing on record to show deliberate and wilful default of evasion of tax — Complaint and summoning order quashed.

Reassessment — Notice for reassessment after 1st April, 2021 — All relevant information provided by assessee prior to original assessment order — AO has no power to review his own order — Query raised by AO answered and accepted during original assessment — Reopening of assessment on mere change of opinion not permissible.

Reassessment — New procedure — Information that income has escaped assessment — Objection from Comptroller and Auditor General required —Internal audit objection cannot form the basis of reassessment — Reassessment based on change of opinion — Reassessment is impermissible in law.

Reassessment — Initial notice — Order u/s. 148A(d) for issue of notice — Notice u/s. 148 — Validity — Notice based on information from insight portal that assessee had purchased property — Assessee disclosing all details including bank statement in response to notice u/s. 142(1) and duly examined by AO in original assessment — Notices and order for issue of notice set aside.

Reassessment — Notice — New procedure — Effect of decision of Supreme Court in Ashish Agarwal — Liberty available to matters at notice stage — Liberty granted by High Court in assessee’s petition against notice under unamended provision prior to Supreme Court decision — AO issuing second notice but allowing proceedings to lapse — Department cannot proceed for third time invoking liberty granted by Supreme Court — Notices and proceedings quashed.

Recovery of tax — Stay of demand pending appeal before CIT(A) — Discretion must be exercised in judicious manner — AO not bound by Departmental instructions.

Rectification of mistake — Mistake apparent from record — Exemption — Income received by non-resident for service rendered on foreign ship outside India — Not taxable in India even if credited to bank in India — Assessee mistakenly declaring in return salary received for services rendered outside India — Rejection of application for rectification — Failure to apply circular issued by CBDT — Error apparent on face of record — Orders refusing to rectify mistake set aside — Assessee entitled to exemption u/s. 10(6)(viii) — Matter remanded to AO. Appeal to Appellate Tribunal — Rectification of mistake — Failure to apply judicial precedents and circular issued by CBDT — Error apparent on face of record — Tribunal has jurisdiction to rectify.

Section 11(1A) – Charitable trust – Permission from the Charity Commissioner before disposing of its property.

Section 36(1)(iii): Interest free advance to subsidiary – for the purpose of business – allowable.

Section 148A – Reassessment –Sanction – Non Application of mind.

Where the assessee transferred 62 per cent of the land to a developer in exchange for 38 per cent of the developed area to be constructed over time under an unregistered joint development agreement / irrevocable power of attorney, the transaction was liable to capital gain under section 2(47)(vi) in the year of the agreement.

No exemption under section 54F is allowable in respect of a building which was predominantly used for religious purposes. Section 54F does not allow pro-rata exemption.

Where pursuant to a scheme of arrangement and restructuring, assessee’s shareholding in a company was reduced, long-term capital loss arising to assessee on account of reduction of capital has to be allowed even if no consideration is paid to the assessee.

Sec. 68: Where assessee, engaged in financial activities, and the records revealed that the credit entries were repayments of loans, and the third party was not a stranger entity and transactions were transparent and had been found to be routed through banking channel and reported in the return of income by the assessee as well as a third party, addition made under section 68 was to be deleted.

Sec. 271B r.w. Sec. 44AA, 44AB and Sec. 271A: Where Penalty u/s 271A is levied for not maintaining books of accounts u/s 44AA, the assessee could not further be saddled with penalty u/s 271B for failure to get books of accounts, which were not maintained, audited u/s 44AB.

If the original return of income is filed within the due date under section 139(1), the carry forward of loss claimed in the revised return filed after the due date under section 139(1) cannot be denied.

Section 92C, read with section 92B, of the Income-tax Act, 1961 — Interest-free loan is an international transaction. The nature of advances, whether it is quasi capital in nature or not, must be seen at the time of granting of advance/loan to the subsidiary.

Section 92C, read with section 92B, of the Income-tax Act, 1961 — In light of peculiar facts, TPO was correct in recharacterizing part consideration of merger in form of cash and CCD as income. Cash payment was to be treated as deemed loan and ALP for CCD interest was determined at Nil.

Section 43B (h) – Kahin Khushi Kahin Gham

BCAS President CA Chirag Doshi’s Message for the Month of March 2024

Punctuations and Grammar

Goods and Services Tax

Recent Developments in GST

Residential Status – Whether Employment Includes Self Employment

कर्मण्येवाधिकारस्ते मा फलेषु कदाचन | समत्वं योग उच्यते ………..| योग: कर्मसु कौशलम् …|

Miscellanea

Regulatory Referencer

Learning Events at BCAS

Internal Peer Review (Health Check-Up)

Interesting Apps