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09.12.2010 - Recent Updates as on 09.12.2010
Thursday, December 9, 2010

1.   COMMISSIONER OF INCOME TAX Vs. M/S VASISTH CHAY VYAPAR LTD., ITA 552 OF 2005, DATE OF ORDER : 29.11.2010, HIGH COURT OF DELHI

The assessee being a  NBFC and bound by the directions given by the Reserve Bank of India, had advanced certain Inter Corporate Deposits (ICD) to M/s Shaw Wallace Company.  The interest thereupon could not be received by the assessee for more than six months.  In these circumstances, treating the said ICD as NPA, the assessee did not show interest income, which according to the assessee was not realizable.  The Assessing Officer, however, added the interest as income of the assessee holding that it had “accrued”to the assessee even if it was not actually realized as the assessee was following mercantile system of accounting.   

The decision is given after observing the decisions of Hon’ble Supreme Court of India in the case of the judgment of  Southern Technologies Ltd. V Joint Commissioner of Income-Tax,  320 ITR 577, relevant extract is as under : 

“that in essence RBI Directions 1998 are Prudential/ Provisioning Norms issued by RBI under Chapter IIIB of the RBI Act, 1934. These Norms deal essentially with Income Recognition.  They force the NBFCs to disclose the amount of NPA in their financial accounts. They force the NBFCs to reflect "true and correct" profits. By virtue of Section  45Q, an overriding effect is given to the Directions 1998 vis-a-vis "income recognition" principles in the Companies Act, 1956. These Directions constitute a code by itself. However, these Directions 1998 and the IT Act operate in different areas. These Directions 1998 have nothing to do with computation of taxable income. These Directions cannot overrule the "permissible deductions" or "their exclusion" under the IT Act. The inconsistency between these Directions and Companies Act is only in the matter of Income Recognition and presentation of Financial Statements. The Accounting Policies adopted by an NBFC cannot determine the taxable income.  It is well settled that the Accounting Policies followed by a company can be changed unless the AO comes to the conclusion that such change would result in understatement of profits. However, here is the case where the AO has to follow the RBI Directions 1998 in view of Section 45Q of the RBI Act. Hence, as far as Income Recognition is concerned, Section 145 of the IT Act has no role to play in the present dispute.” 

The Supreme Court itself has held that when there is a provision in other enactment which contains  a  non-obstante clause,  that would override the provisions of Income Tax Act. 

(Please click here for  judgement)   

  

2.   COMMISSIONER OF INCOME TAX, DELHI-IV Vs. GOVIND NAGAR SUGAR LTD., ITA NO. 1208 OF 2008, DATE OF ORDER 19/11/2010, HIGH COURT OF DELHI. 

Two substantial questions of law were formulated, which are as under : 

a) Whether the interest paid on the late payment of the provident fund can partake the character or nature of the provident fund? 

If the provident dues are not deposited by the employer in time, interest payable thereupon under the PF Act (which is also a statutory liability)would become part of the provident  fund  dues.   

b) Whether the provisions of Section 43B of the Act are applicable on the interest paid by the assessee on the late payment of provident fund?” 

Thus having regard to the fact that interest partakes the character of the provident dues itself, Section  43B of the Act would be attracted and unless this interest is actually paid the assessee would not be entitled to claim deduction in respect thereof. 

(Please click here for judgment) 

     

What's New 

  • Common Errors made while filling Income Tax Returns explained  -

    Department introduces new facility for online submission of rectification request in cases where processing was completed by CPC Bangalore. Please review the guide for common errors to first rectify the return submitted and generate the rectification xml using excel utility  (Click here for the guide for common errors)

  • Manual for submission of rectification request

    Taxpayer can log in My Account-> Rectification-> Rectification upload and follow instructions to upload the rectification xml file. The rectification request will be processed at CPC and if found acceptable, then a rectification order u/s154 will be issued. Please see manual for submission of rectification request. Please note that this facility is only for E-returns processed at CPC  (Click here for Manual for submission of rectification request) 

  • STAX-131-10-Elec meter installed in consumers' premises and hire charges collected  (Click for detail)

  • Circular No.43/ 2010-Customs - Anti Dumping Duty on parts/components of Compact Fluorescent Lamps (CFL) from China and Hong Kong as per Customs Notification No.138/2002  (Click for detail)

  • Notification No. 122/2010-CUSTOMS – export of Bus and Truck Radial Tyres falling under item nos. 40112010 (for tyres) and 40131020 and 40129049 (for tubes and flaps respectively),from China PR, when imported into India, shall be subjected to provisional assessment  (Click for detail)

  • Notification No. 11/ (RE-2010)/2009-2014 - Prohibition on export of Pulses – Exemption for export-DGFT  (Click for detail)

"Don't worry when you are not recognized, but strive to be worthy of recognition  ..........  Abraham Lincoln"
    
Thanks for your valuable time 

"Voice of CA"

CA. Sanjay Kumar Agarwal, Founder - Voice of CA
Member  Central Council - ICAI
Former Chairman - NIRC
Mob : 9811080342,
agarwal.s.ca@gmail.com  
    
   
CA. Sidharth Jain, Co-Moderator
sidhjasso@yahoo.com 
  
CA. Mukesh K Bansal, Co-Moderator-FEMA
Mob:9540022533,
mukbansal80@gmail.com 

  

 

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