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06.10.2016 - Voice of CA presents - Updates
Thursday, October 6, 2016

I. Headlines Today    

  1. CBDT committed to Strict Confidentiality under Income Declaration Scheme 2016  (Click for detail)
  2. Income Declaration Scheme: Here’s why the big fish have got away  (Click for detail)
  3. Over Rs 71,000 cr disclosed under IDS, says ICAI  (Click for detail)
  4. MCA Notification: National Advisory Committee on Accounting Standards  (Click for detail)
  5. India can save Rs 70,000 crore by reducing cash transactions  (Click for detail)
  6. 1.75 crore RTI applications filed since 2005  (Click for detail)
  7. India Economic Summit to begin today  (Click for detail)
II.  Direct Taxes Case Laws: 

1.  Oil and Natural Gas Corporation Ltd. Vs. ACIT (TDS), Tax Appeal No. 368 & 371 of 2016, Date of Judgment: 15.09.2016, High Court of Gujarat

Whether a mere prescription for dress code will qualify to be a uniform for considering uniform allowance under Section 10(14)(i) of the Income Tax Act, 1961?


Brief Facts:
During the Financial year 2008-09, a survey operation was carried out at the premises of the assessee company and lapses were noted in the uniform allowances paid to the employees. During the Assessment Year 2010-11, AO contended that no TDS was deducted on such benefit given to the employees and because no uniform was prescribed to the employees by the employer, the said allowance would not be considered under Section 10(14)(i) of the Income Tax Act, 1961 read with Rule 2BB of the Income Tax Rules, 1962. On enquiry made by the AO from the employees, it was noted that the company had prescribed the uniform until only 11.11.1995, after which the prescribed uniform was discontinued but the uniform allowance was continued and such amount was adjusted towards additional contribution of post retirement benefit scheme. Keeping the same reasons on record, AO disallowed such expenditure for non deduction of TDS under Section 194. CIT(A) upheld the order of AO. ITAT dismissed the appeal of the assessee justifying the view taken by the AO. Aggrieved by which, the assessee appealed before the Hon’ble High Court.

The assessee contended that ONGC had issued circular dated 05.12.1987 prescribing uniform for both male and female employees. It was held that the specification provided by ONGC in relation to dressing would fit into the meaning of dress code which implies minimum standard of dressing depending on the place and occasion carrying a wide range of choices. While uniform necessarily includes subtle instructions relating to dress, design, and color which will create uniformity in dressing at a work place. Further, as explained in the Webster’s Third New International Dictionary, Uniform is marked by lack of variation, diversity, and change in form, manner, and worth or degree, marked by complete conformity to a rule or pattern or by salient detail or practice; marked by unvaried and changeless appearance. Thus, the term uniform carries a precise meaning different from broader concept general dress code. Therefore, the appeal of the assessee is dismissed.

(Please click here for judgment)


2.  CIT Vs. Shree Balaji Glass Manufacturing Pvt. Ltd., I.T.A. No. 23 of 2009, Date of Order: 13.07.2016, High Court of Calcutta

Whether payment made in the ordinary course of business of money lending which is substantial part of the business of the company would fall within the mischief of Section 2(22)(e) of the Act.?


Brief Facts:
The assessee borrowed money from Pushpak Commercial Finance Pvt Ltd of Rs. 1.20 crores and Anjani Highrise Pvt Ltd of Rs. 1.79 crores. The borrowed money representing share premium and accumulated profits. In the case of Anjani High Rise Pvt Ltd there was no accumulated profit. The money was lent from out of reserve and surplus constituted by share premium account. Whereas in the case of Pushpak Commercial Finance Pvt Ltd, the accumulated profits were only a sum of Rs.18,36,454.03/-. The money lent was a sum of Rs.1,12,50,000/-. The balance sum admittedly was from out of the share premium account. The ld AO has treated the amounts representing share premium and accumulated profits as deemed dividend.  The finding of the AO was reversed by the CIT (A) and upheld by the Tribunal. The necessary ingredients in order to impart character of deemed dividend to any payment made by a company is that such payment should have been made by the company from out of its accumulated profits. The assessee claimed exception in respect to the amount borrowed from the accumulated profits of Pushpak Commercial Finance Pvt. Ltd, on the grounds that lending of money was a substantial part of the business of the company and thus treated is as a loan in the ordinary course of its business and Tribunal held that Unless the payment is made from out of accumulated profits, the payment does not partake the character of deemed dividend.

The question as to whether the learned Income Tax Appellate Tribunal was justified in allowing the relief to the assessee when the money was paid from out of reserve and surplus representing share premium is answered in the affirmative because share premium does not constitute accumulated profits or even profits of the company. The balance sum of Rs.18 lakhs and odd paid from out of the accumulated profits would not bring the payment made by Pushpak Commercial Finance Pvt Ltd. to the assessee within the mischief of Section 2(22)(e) because the payment has been held to have been made by Pushpak Commercial Financed Pvt Ltd in the ordinary course of its business of money lending which is substantial part of the business of the company. The appeal is, thus, dismissed.

(Please click here for judgment)  

 Golden Rules:

  "A Human Tongue takes 3 years to learn how to use it
but it takes Life time to learn when and where to use it"


  Thanks & Regards


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