May 292021
 

Difference between Fresh Claim and Revision in the claim:

Fresh claim Revision of claim
Fresh claims were never claimed in the return of income. In many situations, it has been noticed that the taxpayers sometimes fail to claim or short claim certain deductions/exemptions in the original Income tax returns filed. In ‘revision of claim’, the claim has already been made in the return of income, but not made as per provisions of law and as such, needs revision. The evidence for the same is already on record, but the section/mode/method/quantum of deduction needs revision.
For example:

1.       Deduction for preventive medical check-up not claimed in ITR – 1

2.       Deduction in section 80C is claimed to be Rs 40,000/- however actual investment was Rs 60,000/-. So, for Rs. 20,000/- claim under section 80C would be a fresh claim.

For example:

Claim of Rs 80,000/- for medical premium is shown in deduction under section 80C but actually, it pertains to section 80D.

 

Revision in return and amendment in return:

A revised return is not for an amendment in return. In case the assessee deliberately omitted the particulars of income and made wrong statements in the original return, then the revised return will not serve the purpose.

In the above circumstances, the Assessing Officer has the power to treat the revised return as non-est.

It is pertinent to mention here that Assessing Officer is competent to reject the revised return only during the course of assessment proceedings. The consideration of the revised return is part of a composite exercise of an assessment and the Assessing Officer, therefore, can reject or accept the revised return during the assessment proceeding.

Fresh claim in revised return:

Section 139(5) is applicable when there is a “discovery of any omission” or “wrong statement” by the assessee in the original return of income. The word ‘discovers’ used in section 139(5) connotes discovery of some omission or wrong statement in return of income of which the assessee was not aware at the time of filing the original return of income.

The provisions of section 139(5) contemplated that the assessee could file the revised return:

  • when the assessee ‘discovered any omission or any wrong statement.

The word ‘omission’ means an unintentional act or include performing what the law required; the word ‘wrong statement’ includes in its scope ‘a statement which was not observant to the knowledge of the person making it; and the word ‘discover’ would take in its ambit ‘that which was hidden, concealed or unknown’.

  • If the assessee deliberately omitted the particulars of income and made wrong statements in the original return, the revised return would not bring the case within the scope of section 139(5).
  • Further, the requirement is that this omission and wrong statement in the original return must be due to bona fide inadvertence or mistake on the part of the assessee on the basis of evolution or material on record.

Conclusion:

It was therefore, necessary to ascertain as to whether there was any wrong statement made in the return of income originally filed by the assessee and whether the assessee was not aware of such wrong statement at the time of filing the original return. For this purpose, the claim made by the assessee in revised return of income, vis-à-vis the return of income filed originally to be examined on merit to ascertain whether there was any wrong statement made in the original return of income of which the assessee was not aware at the time of filing the original return of income.

May 272021
 

Type of computer software:

Shrink-wrap software is the readily available software that is sold “Off-the-shelf”. Here, the software is packaged with the license agreement. The license gives the endorser the limited right to use the software for the perpetual period. The right is neither transferable nor can the buyer sub-license the software. Any user operating the package is deemed to have knowledge of the copyright of the software. Payment for the purchase of such a product would not be regarded as payment for royalty.
Customized software is the software that is tailor-made based on the specific needs of the customer (single user). Customization of canned software includes individualized configuration of software to work with other software and computer hardware but doesn’t include routine installation. Customization of canned software does not change the underlying character or taxability of the original canned software.
Bundled software is embedded with the hardware and is bought along with the computer. Most of the application software is available in “unbundled” form, especially if it is bought subsequent to the purchase of a computer.
Canned software is independent software that can be used by a variety of hardware and may be applied for management, consulting, and administration.

 

Meaning of terms “ROYALTY”:

As per DTAA – Article 12 As per the income tax act
Payments of any kind received as a consideration for the use of or the right to use any copyright of a literary, artistic, or scientific work, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience including gains derived from the alienation of any such right or property which are contingent on the productivity, use or disposition thereof. Under Sec 9(1)(vii) of the Income Tax Act in Explanation 2 the term ‘fees for technical services’ is defined as any consideration (including any lump sum consideration) for the rendering of any managerial, technical, or consultancy services (including the provision of services of technical or other personnel).

 

Thus, what is considered to be royalty is – If the consideration is for the right to commercially exploit the intellectual property in the software, then the same could be considered as royalty. It is also pertinent to mention here that where the consideration paid is for the purchase of a product and not for the transfer of the intellectual property per se, it may not be regarded as royalty.

 

Taxability under the income tax act:

Domestic sale: The domestic transactions involving the sale of software/copyright/license or rendition of IT-enabled software services are taxable as “INCOME UNDER THE BUSINESS” head and are taxed as per normal provisions of the Income Tax Act.

Sale from a foreign land: Transactions in relation to computer software may fall in any one of the following categories:

Transfer of a copyright right in the computer programme Transfer of a copy of the computer programme   Services for the development or modification Software related services
Indian entity acquires almost all the rights. Indian entity acquires right to use the same for personal use Customer engages a software development company to develop or modify software for the former, whereby all the rights in relation to such software will belong to the customer. All other services such as installation, maintenance, training, etc.
Tax treatment:

Taxed as business income.

Tax treatment:

Taxed as business income

Tax treatment:

Taxed as business income.

Tax treatment:

Taxed as Fees for Technical Services

 

Mode of taxation and its business impact:

Mode of taxation Business impact
Royalty  Payments are subject to withholding tax (similar to TDS) at 20%, subject to reduced rates if any given in DTAA, on a gross basis
Business Income Such payments taxed in India only if the foreign company has a business connection (permanent establishment in case there exists a DTAA between India and the country of residence of the concerned foreign entity) in India.

 

Only that portion of income that is attributable to BC and/or PE in India will be subject to tax in India at the rate of 40% on a net basis.

Fees for Technical Services These could be subject to withholding tax in India at the rate of 20% on a gross basis. However, if a reduced rate of withholding tax has been prescribed in the DTAA between India and the country of residence of the foreign entity, then that reduced rate shall be applicable.

 

Conclusion:

The amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that

The same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income Tax Act were not liable to deduct any TDS under section 195 of the Income Tax Act.

May 242021
 

Up-to assessment year 2020-21:

There was no upper cap on the employer’s contribution to the various employee welfare schemes. Separate provisions were available in the Income-tax Act to tax such contribution, i.e.,

  1. Superannuation fund was taxable as perquisite under Section 17(2)(vii)in the hands of the employee only if such contribution exceeded Rs. 1,50,000 during the year.
  2. The employer’s contribution to the NPS is taxable in the hands of the employee and included in his salary income. However, a corresponding deduction is allowed to the employee for such contribution to the extent of the lower of the amount contributed by the employer to NPS, or 14% of salary in case of Central Government employee or 10% of salary in case of any other employee.
  3. Employer’s contribution, exceeding 12% of salary, in EPF account is charged to tax in the hands of employees.

Finance Act 2020:

The substituted Section 17(2)(vii) introduce an overall cap on the maximum contribution an employer can make towards Recognized Provident Fund (PF), National Pension Scheme (NPS), and Superannuation Fund (hereinafter referred to as ’employee’s welfare Funds’).

This clause provides that the aggregate contribution to employee’s welfare funds in excess of Rs. 750,000 shall be taxable as perquisite in the hands of the employees. However, the existing provisions relating to the contribution to NPS and PF remain the same.

Reason for amendment – to curb the benefits of high-income employees:

All the employee’s welfare funds enjoy the EEE status (Exempt-Exempt-Exempt) whereby no tax is levied at the time of contribution, accretion, and withdrawal if the same is within a certain limit. Thus, the employees with high salary income were obtaining the undue advantage of this taxation regime by designing their salary package in a manner in which a substantial part of the salary is paid by the employer by way of contribution to these funds and, consequently, that portion of salary does not suffer tax at any point.

Manner of computation:

A new sub-clause (viia) has also been inserted to Section 17(2) that the annual accretion by way of interest, dividend or any other amount of similar nature during the previous year, relating to contribution in excess of Rs. 750,000, shall also be taxed as a perquisite in the hands of the employee. Hence, the CBDT has inserted a new Rule 3B to prescribe the manner for computation of such annual accretion by giving the following formula in this regard:

Taxable perquisite under section 17(2)(viia) for the current previous year , i.e., TP = (PC/2)*R + (PC1+ TP1)*R

Where,

(a) TP = Taxable perquisite under section 17(2)(viia) for the current previous year;
(b) TP1 = Aggregate of taxable perquisite under section 17(2)(viia) for the previous year(s) commencing on or after 01-04-2020 other than the current previous year.
(c) PC = Aggregate of the principal contribution made by the employer in excess of Rs. 7.50 lakh to the employee’s welfare funds during the previous year;
(d) PC1 = Aggregate of the principal contribution made by the employer in excess of Rs. 7.50 lakh to the employee’s welfare funds for the previous year(s) commencing on or after 01-04-2020 other than the current previous year;
(e) R = I/ Favg;
(f) I = Aggregate of income accrued during the current previous year in the employee’s welfare funds;
(g) Favg = (Aggregate of balance to the credit of the employee’s welfare funds on the first day of the current previous Year + Aggregate of balance to the credit of the employee’s welfare funds on the last day of the current previous year)/2

Where, PC1+ TP1 > aggregate of balance to the credit of the specified fund or scheme on the first day of the current previous year = the amount in excess of the aggregate of amounts of the said balance shall be ignored to compute the aggregate of amounts of TP1 and PC1.

To put in simple terms,

The perquisites arising from the annual accretion on the employer’s contribution to welfare funds shall be the average return (I/Favg) on the sum of:

(a) ½ of the current year’s contribution in excess of Rs. 750,000;
(b) Contribution in excess of Rs. 750,000 up to last year; and
(c) Accretion taxable as perquisite up to last year.

If the sum of (b) and (c) exceeds the opening balance of the fund, it shall be restricted to such opening balance.

May 212021
 

Facts:

Uber Technologies Inc. (parent of Uber India) is a USA-based company that owns Uber App which provides lead generation services (online platform) to the various independent driver-partners. The driver partners use the platform of Uber to contract with various customers in India (the contract of transportation is between Driver-partners and customer directly). Following services are provided by Uber:—

i. Informing driver about customers who need transportation services;
ii. Connecting driver with the customers in real-time;
iii. Offer an option to collect fare digitally; &
iv. Making a payment to the driver for fare collected.

For the abovementioned service, Uber charges a Service Fee from Driver Partner. Driver-partners are free to choose the timings and other conditions of the ride even whether to accept/reject the ride and therefore, the said drivers are neither the employee of Uber nor they are agents but are entering a transaction with Uber on principal to principal basis.

Uber India’s role in the complete process is only to provide cash collection and other support at a cost-plus markup basis to the Uber Group.

Issue involved:

Whether the payment made by Uber to various drivers located in India is liable to deduction of TDS u/s 194C? Whether remittances of payment by Uber India to Uber Technologies Inc. involve TDS deductions?

Relevant rules analysis:

Condition to attract liability to deduct TDS u/s 194C Analysis
The person responsible for payment Uber India is only a remitter of money and not a payer or liable to pay money.
The disbursement to the driver should be in pursuance of any work done for Uber India  The payment made by Uber is not for the work done by the driver under any agreement.
There is a contract between Uber India and driver for the work done The contract between Uber and driver is only to provide lead

 

Conclusion:

Therefore, it can be held that Uber India is not liable to deduct TDS on payments made to drivers as well as its parent company in the USA. The same analogy would apply to all other e-commerce companies which are struggling with the withholding tax compliances in India. These principles would apply in all cases where the platform is only keeping a minuscule margin for providing the technical support however, every case has to settle by looking at who is the principal service provider.

Therefore to put such transaction of sale or provision of service into TDS ambit government has issue section 194-O when is reproduce below:

194-O. (1) Notwithstanding anything to the contrary contained in any of the provisions of Part B of this Chapter, where the sale of goods or provision of services of an e-commerce participant is facilitated by an e-commerce operator through its digital or electronic facility or platform (by whatever name called), such e-commerce operator shall, at the time of credit of the amount of sale or services or both to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant by any mode, whichever is earlier, deduct income-tax at the rate of one percent of the gross amount of such sales or services or both.

May 182021
 

Facts:

The date of allotment of the property was 20-5-1986,

Consideration paid for allotment of property on 29-5-1986

Date of possession certificate 23-6-1998 and title deed was executed on 06-01-2004

The issue is whether, for computing cost of inflation of asset, the date to be reckoned was the date of allotment of property to the assessee, i.e. 1986-1987, or date on which possession certificate was issued, i.e. 1998-1999?

Impact analysis: while computing the cost of acquisition and/or cost of improvement in the case of long-term capital assets, indexation of the nominal value of actual money invested in acquiring such property is allowed. Higher the indexation factor more will be the indexed cost and lower will be taxable capital gain which is computed after deduction of such indexed cost from “net consideration received or receivable”.

“indexed cost of acquisition means an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, [2001], whichever is later;

“Cost Inflation Index”, in relation to a previous year, means such Index as the Central Government may, having regard to seventy-five percent of average rise in the Consumer Price Index (urban) for the immediately preceding previous year to such previous year, by notification in the Official Gazette, specify, in this behalf.

Thus, if we consider the index of 1986-1987 the indexed cost works out to be Rs. 20,34,539/- however considering the year 1998-1999 same would be Rs. 8,11,497 resulting in a difference in a taxable long-term capital gain of Rs. 12,23,042/-.

Relevant rules:

“Short term capital asset” in Section 2(42A), a capital asset held by an assessee for not more than thirty-six months immediately preceding the date of its transfer is a Short term capital asset.

Section 2(29A) defines “Long term capital asset” means a capital asset that is not a short-term capital asset.

Analysis of law:

For the purpose of determining the nature of capital gain, the law is concerned with the period during which the asset is held by the assessee for all practical purposes on a de facto basis. The law is not concerned with absolute legal ownership of the asset for determining the holding period.

The allottee gets the title of the property on the issuance of an allotment letter and full payment of the cost of the site. The issuance of a possession certificate is only a consequential action upon which delivery of possession flows. Therefore, the date of allotment letter and payment of consideration viz., 29-5-1986, i.e. 1986-87, is the year of acquisition for the purpose of calculation of the inflated cost of acquisition.

When a capital asset is transferred, in order to determine the capital gain from such transfer, what is to be seen is, out of the full value of the consideration received or accruing, the cost of acquisition of the asset, the cost of improvement and any expenditure wholly or exclusively incurred in connection with such transfer is to be deducted. What remains thereafter is the capital gain. It is not necessary that after payment of the cost of acquisition, a title deed is to be executed in favor of the assessee.

Conclusion:

Even in the absence of a title deed, the assessee holds that property, and therefore, it is the point of time at which he holds the property, which is to be taken into consideration in determining the period between the date of acquisition and date of transfer of such capital gain in order to decide whether it is a short-term capital gain or a long term capital gain and accordingly indexation needs to be done.

May 142021
 

Facts:

Assessee deductor had made payments under the head “uniform allowance”; however, the deductor had neither included this allowance to the total salary payments nor had he deducted tax at source (TDS) on such income.

The assessee had disclosed in writing that out of around 790 to 800 employees at Hazira, 752 employees had taken this reimbursement on the basis of self-certification and thus, it has not been included in the gross salary chargeable to TDS under section 192 of the Act for the financial year in question presuming that since the employees had given self-certification, they might have incurred or would be incurring such expenditure. Therefore, no further check had been observed by the deductor as to whether they had actually incurred such expenditure or not, and original/genuine and real bills and vouchers to this effect were not taken at the relevant point of time during the relevant financial year.

Section 10(14)(i) of the Act provides that any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of section 17, specially granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, as may be prescribed to the extent to which such expenses are actually incurred for that purpose are not to be included in the total income of the assessee

Thus, the assessee had claimed expenditure incurred towards uniform allowance as exempt section 10(14)(i) of the Act on the basis of self-certification by the concerned employees without calling for any proof in the nature of bills, vouchers, etc. regarding such expenditure having been actually incurred and without due verification.

Section 10(14)(i) on the above point:

Section 10 of the Act provides that the total income of a previous year of any person falling in any of the clauses set out thereunder shall not be included. Sub-clause (i) of clause (14) thereof, as it stood at the relevant time, reads thus:

“(14) (i) any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of duties of an office or employment of profit, as may be prescribed, to the extent to which such expenses are actually incurred for that purpose.”

Rule 2BB of the rules prescribe the allowances for the purpose of clause (14) of section 10. The allowances enumerated under sub-rule (1) thereof are prescribed for the purposes of clause (14) of section 10. The allowance prescribed by clause (f) of Rule 2BB(1) of the rules is any allowance granted to meet the expenditure incurred on the purchase or maintenance of uniform for wear during the performance of the duties of an office or employment of profit.

 

 

Analysis:

The present case relates to uniform allowance, which as noticed earlier is exempt from tax under section 10(14)(i) of the Act read with rule 2BB(1)(f) of the rules to the extent to which such expenses are actually incurred for that purpose. Under the Act, the liability to the employer is to deduct tax at source to the extent of the taxable income of the employee. If any part of such income is exempt, there is no liability to deduct tax at source from such income. Since liability to pay tax under the Act is of the individual employee and the liability on the part of the employer is only to deduct tax at source, Circular No. 15 dated 8-5-1969 provides that self-certification on the part of the employee is sufficient for the disbursing officer for calculation of the tax-deductible at the source. While the said circular relates to conveyances, the underlying principle can well be applied even in the case of uniform allowance. Therefore, if an employee gives a certificate certifying that he had incurred certain expenditure towards uniforms and maintenance thereof, insofar as the disbursing officer is concerned, that would be adequate while calculating the tax deductible at source.

However, if no uniform was prescribed by the employer then, the payment of allowance under the head of the uniform allowance would not fall within the exemption clause of section 10(14)(i) of the Act read with rule 2BB of the rules.

May 122021
 

Facts:

This issue relates to a gift of Rs.50,000 received from the father of the assessee and a gift of Rs.50,000 from the sister-in-law. However, the assessee is unable to explain the occasion of receiving such gifts.

Following are undisputed facts in the above case:

  1. Gifts have been received through the banking channel
  2. The identity of the donors is well established.
  3. Both the donors, i.e., the father and sister-in-law, fall under the category of relatives provided in explanation (e) of section 56(2).

Section 56(2)(v), (vi) & (vii)

Where any sum of money exceeding twenty-five thousand rupees is received without consideration by an individual or a Hindu undivided family from any person on or after the 1st day of September 2004 59[but before the 1st day of April 2006], the whole of such sum :

Provided that this clause shall not apply to any sum of money received—

 

(a) from any relative; or
(b) on the occasion of the marriage of the individual; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer; or
60[(e) from any local authority as defined in the Explanation to clause (20) of section 10; or
(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
(g) from any trust or institution registered under 60a[60aa[section 12AA]].]

 

Explanation.—For the purposes of this clause, “relative”61 means—

 

(i) spouse of the individual;
(ii) brother or sister of the individual;
(iii) brother or sister of the spouse of the individual;
(iv) brother or sister of either of the parents of the individual;
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the individual;
(vii) spouse of the person referred to in clauses (ii) to (vi);]

 

62[(vi) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April 2006 63[but before the 1st day of October 2009], the whole of the aggregate value of such sum:

Analysis of Section 56(2):

From a perusal of section 56 sub-section (2) as well as explanation (e), we find that sections 56(2)(v), 56(2)(vi) & 56(2)(vii) which provides a cap of the sum received without consideration by an individual or Hindu Undivided Family (HUF) to be taxed as income from other sources, if amount exceeding the cap provided in these sub-sections is received by the assessee.

However, the above sub-sections 56(2)(v), 56(2)(vi) & 56(2)(vii) shall not be applicable if any sum is received from any relative ( as defined in explanation (e) to section 56).

There is no mention about the occasion to be a necessary condition for receiving any sum from any relative.

Conclusion:

In the instant case, the alleged gifts of Rs.50,000/-, Rs.1,00,000/- and Rs.50,000/- for A.Ys. 2004-05, 2005-06 & 2006-07 have been received from relatives of the assessee i.e. father and sister-in-law through account payee cheques/demand draft. Therefore, the same cannot be included in the income of the assessee by any cannon of law.

Hence, the above payments can not be added on account of unexplained gifts for all three assessment years.

May 102021
 

Facts:

Whether, a third partly viz., National Financial Switch and Cash Tree has been acting as an agent by collecting charges from the bank for its services rendered to the bank as an intermediary between the bank and its customers? Or

Whether there is a relationship between the parties shall be regarded as a principal-to-principal basis?

And therefore, whether the provisions of section 194H apply and whether the bank is liable to deduct TDS on each transaction of service charge payable to a third party.

Relevant Rules:

Section 194H – TDS on Commission, brokerage, etc.

(1) Any person, not being an individual or a Hindu Undivided Family, who is responsible for paying, on or after the 1st day of October 1991, but before the 1st day of June 1992 to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten percent.

(2) The provisions of sub-section (1) shall not apply-

(a) to such persons or class or classes of persons as the Central Government may, having regard to the extent of inconvenience caused or likely to be caused to them and being satisfied that it will not be prejudicial to the interests of the revenue, by notification in the Official Gazette 4, specify in this behalf;
(b) where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person referred to in sub-section (1) to the account of, or to, the payee, does not exceed two thousand five hundred rupees.
Explanation.- For the purposes of this section,-
(i) ” commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or concerning any transaction relating to any asset, valuable article or thing;
(ii) ” professional services” means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as is notified by the Board for the purposes of section 44AA;
(iii) where any income is credited to any account, whether called “Suspense Account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be the credit of such income to the account of the payee and the provisions of this section shall apply accordingly.

 

Analysis of facts and Section 194H:

Mode of working:

Suppose, the credit card issued by the bank was used on the swiping machine of another bank, the customer whose credit card was used got access to the internet gateway of acquiring bank resulting in the realization of the payment.

Subsequently, the acquiring bank realizes and recovers the payment from the bank, which had issued the credit card.

Analysis of working in the eyes of law:

The relationship between the assessee and any other bank is not of an agency but that of two independent bases on a principal-principal basis.

Even assuming that the transaction was being routed to National Financial Switch and Cash Tree, then also it is pertinent to mention here that the same is a consortium of banks and no commission or brokerage is paid to it.

if the payment was received or is receivable directly or indirectly by a person acting on behalf of another person for services rendered not being professional and for any services in the course of buying and selling of goods or in relation to any transaction relating to an asset, valuable article or thing.

Also, from a perusal of section 194H, it is evident that the provision would apply if the payment was received or is receivable directly or indirectly by a person acting on behalf of another person for services rendered not being professional and for any services in the course of buying and selling of goods or in relation to any transaction relating to an asset, valuable article or thing.

Conclusion:

Thus, in the instant case, the third party and the bank are acting as independent parties and hence, the bank is not liable to deduct TDS on service charges payable to a third-party agency.

May 072021
 

Due dates for the Month of May 2021
7th
INCOME TAX
– TDS Payment for April.
10th
GST
– Return of authorities deducting tax at source – GSTR 7 for April.
– Details of supplies effected through e-commerce operator and the amount of tax collected – GSTR 8 for April.
11th
GST
– Details of outward supplies of taxable goods and/or services effected – GSTR 1 for April.
13th
GST
– Return for Input Service Distributor – GSTR 6 for April.
15th
Providend Fund
– PF Payment for April.
ESIC
– ESIC Payment for April.
20th
GST
– Monthly return on the basis of finalization of details of outward supplies and inward supplies along with the payment of the amount of tax – GSTR 3B for April.
– Return for Non-Resident foreign taxable person – GSTR 5 for April.
22nd
GST
– GSTR 3B for April if turnover below Rs. 5 Crore for Gujrat, Madhya Pradesh, Chattisgarh, Maharashtra, Telangana. Andhra Pradesh, Karnataka, Goa, Kerala, Tamil Nadu, Puducherry, Dadra & Nagar Haveli.
24th
GST
– GSTR 3B for April if turnover below Rs. 5 Crore for the Rest of India.
28th
GST
– Details of Inward Supplies to be furnished by a person having UIN and claiming refund – GSR 11 for
April.
30th
LLP
– Form 11 – Annual Return for Previous Financial Year.
31st
PROF. TAX
– Monthly Return for Tax Liability of Rs. 100,000 & above.
Sensys Technologies Pvt. Ltd.
HO: 904, 905 & 906, Corporate Annexe, Sonawala Road, Goregaon East, Mumbai- 400 063.
Tel.: 022-6820 6100| Call: 09769468105 / 09867307971
Email: sales@sensysindia.com | Website: http://www.sensysindia.com
Branches: Delhi & NCR | Pune | Bangalore | Hyderabad | Ahmedabad | Chennai | Kolkata
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May 052021
 

Facts:

Liabilities Assets
Capital a/c

Income earned during the year                         Rs 35,0000

Investment

(For claiming deduction u/s 80CCA & 80CCB)

National Savings Scheme – Rs 40,000

Unit Trust of India – Rs 10,000

Unsecured loans                                                 Rs 2,05,000 Loan and Advances

M/s. Ganesh Prasad Hira Lal – Rs 200,000

Less: withdrawals – (Rs 50,000)

(Invested in NSC and UTI) – Rs 150,000

Whether the above claims of deductions against investment be rejected on the ground that the same had not come out of income chargeable to tax?

Relevant rules:

Section 80CCA – Deduction in respect of deposits under National Savings Scheme or payment to a deferred annuity plan. (1) Where an assessee, being—

(a) an individual, or
(b) a Hindu undivided family, 19[***]
(c) 20[***]

has in the previous year—

(i) deposited any amount in accordance with such scheme as the Central Government may, by notification21 in the Official Gazette, specify in this behalf 22[* * *]; or
(ii) paid any amount to effect or to keep in force a contract for such annuity plan of the Life Insurance Corporation as the Central Government may, by notification23 in the Official Gazette, specify,

out of his income chargeable to tax, he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income of the whole of the amount deposited or paid (excluding interest or bonus accrued or credited to the assessee’s account, if any) as does not exceed the amount of twenty thousand rupees in the previous year :

Section 80CCB – Deduction in respect of investment made under Equity Linked Savings Scheme. (1) Where an assessee, being—

(a) an individual, or
(b) a Hindu undivided family, 31[* * *]
(c) 32[* * *]

has acquired in the previous year, out of his income chargeable to tax, units of any Mutual Fund specified under clause (23D) of section 10 or of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), under any plan formulated in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf (hereafter in this section referred to as the Equity Linked Savings Scheme), he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income of so much of the amount invested as does not exceed the amount of ten thousand rupees in the previous year :

Analysis of principles for claiming deductions out of investments made under section 80CCA etc:

  1. Investment in National Savings Certificates, etc. for claiming deduction under section 80C of the Act, need not be from the income earned up to that period.
  2. It is sufficient – if the total income for that year covers the investment

Thus, in the instant case assessee’s current year income is sufficient to cover the current year’s investment and hence deductions shall be allowed for the aforesaid investments. Thus, the mathematical rule for claiming deductions under section 80CCA and section 80CCB would be:

An aggregate of investments under section 80CCA and section 80CCB < Gross taxable income of the previous year whose tax liability needs to be calculated