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Senior Advisor - Direct & International Tax
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Coming to this month’s, Taxation Times, here’s what we have :
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UJA Tax Team
In today’s rapidly changing economic and regulatory environment, both businesses and individual taxpayers face new challenges and opportunities. The recent tax reforms and international trade agreements are reshaping the tax landscape, making it essential to stay informed and adaptable. This article provides practical strategies to help businesses and individuals not only navigate these changes but also thrive amidst them.
Adapting to the evolving tax landscape requires vigilance, strategic planning, and proactive measures. By understanding the recent tax reforms and leveraging available deductions and credits, businesses and individuals can optimize their tax positions and thrive amidst change. Stay informed, seek professional guidance, and make strategic financial decisions to navigate this complex environment successfully.
Facts: The assessee-company filed its return of income, declaring total income.
The assessee was registered as a charitable trust with the DIT (exemption) under Section 12A. The Assessing Officer noted that the assessee had made large payments of salaries to certain specified persons under Section 13(3) who were in occupation with educational institutes run by the trust, which were not justifiable as compared to payments made to other persons who had rendered the same services. He also noted that the assessee had made payments of large amount of rent to the specified persons under Section 13(3) and held that the market rental report was a self-serving document and was not an acceptable basis for ascertaining the fair rental value of the property. Thus, the Assessing Officer, by invoking provisions under Section 13(3)(c), 13(2)(c) r.w.s. 13(2)(g) the claim of exemption under Section 11.
On appeal, the Commissioner (Appeals) directed the Assessing Officer to allow the exemption claimed by the assessee under section 11.
On the assessee’s appeal to the Tribunal.
Held: In the instant case, on the basis that the assessee has made excessive payments on account of salary and rent to the specified persons under Section 13(3), the Assessing Officer denied the exemption claimed by the assessee under Section 11. Accordingly, the AO asked the assessee to explain and justify the payments made to the specified persons under Section 13(3). After considering the submissions of the assessee, the AO considered a certain amount of payment of the total salary as reasonable in comparison to the total salary of a certain amount paid by the assessee and disallowed the excess amount.
Therefore, the AO made the impugned addition on account of rental payments to specified persons under Section 13(3) without any basis. Accordingly, there is no infirmity in the findings of the CIT(A) on this issue, and therefore, the same are upheld. Since the payment made by the assessee on account of salary and rent is not found to be excessive of what may be reasonably paid to specified persons under section 13(3), the provisions under section 13(3)(c) and 13(2)(c) r.w.s. 13(2)(g) are not attracted in the instant case, and the assessee has rightly claimed the exemption under section 11. As a result, the grounds raised by the revenue are dismissed.
In Favor of: The Assessee
Facts: There was a reporting by the auditor in the tax audit report (TAR) which said that the assessee had collected tax at source on sales of scrap, however, the amount so collected had not been deposited with interest thereon and no return of TCS was filed till date of TAR. On the basis of above mentioned qualified reporting in TAR, an addition of certain amount had been made in the income of the assessee by the CPC for violation of provisions of section 43B.
On appeal, the first appellate authority also sustained the addition made by the CPC.
On the assessee’s appeal to the Tribunal.
Held: This is a case of tax collected at source by the assessee from the buyer. In the instant case, the assessee is engaged in the business of trading in scrap and the provisions of section 206C(1) are applicable to him for the collection of tax at specified percentage of consideration of sales as income tax.
In the instant case, the assessee has declared sales in audited profit and loss account at Rs. 9.91 crores (excluding TCS) (as confirmed by the AR during hearing of the case) and since TCS is not credited in the accounts, the question of debiting the said amount in profit and loss account also does not arise.
The TCS amount is not a sum payable by the assessee; it is the income tax of the buyers, collected and retained by the assessee as per provisions of section 206C, recorded through journal entries, and held by the assessee as custodian of the government. The same is duly reflected as liability in the audited balance sheet as of March 31, 2022.
Since the said amount of “income tax” of the buyers cannot be debited from the profit and loss account and claimed as a deduction, the assessee is not hit by the provisions of section 43B, and the addition is liable to be deleted.
In Favor of: The Assessee.
Section 48 of the Income-Tax Act, 1961 – Capital Gains – Computation of – Notified Cost Inflation Index
In exercise of the powers conferred by clause (v) of the Explanation to section 48 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following further amendments in the notification of the Government of India, Ministry of Finance (Department of Revenue), Central Board of Direct Taxes published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (ii) number S.O. 1790(E), dated the 5th June, 2017, namely:—
In the said notification, in the Table, after serial number 23 and the entries relating thereto, the following serial number and entries shall be inserted, namely:-
TABLE
Sl. No. | Financial Year | Cost Inflation Index |
(1) | (2) | (3) |
“24 | 2024-25 | 363″ |
This notification shall come into force with effect from the 1st day of April, 2025 and shall accordingly apply in relation to the assessment year 2025-26 and subsequent assessment years.
NOTIFICATION S.O. 2103(E) [NO. 44/2024/F.NO.370142/10/2024-TPL], DATED 24-5-2024
Gross Direct Tax Collections for the Financial Year (FY) 2024-25 Register a Growth of 22.19% – Net Direct Tax Collections for the FY 2024-25 have grown at over 20.99%
The provisional figures of Direct Tax collections for the Financial Year 2024-25 (as on 17-6-2024) show that Net collections are at Rs. 4,62,664 crore, compared to Rs. 3,82,414 crore in the corresponding period of the preceding Financial Year (i.e. FY 2023-24), representing an increase of 20.99%.
The Net Direct Tax collection of Rs. 4,62,664 crore (as on 17-6-2024) includes Corporation Tax (CIT) at Rs. 1,80,949 crore (net of refund) and Personal Income-tax (PIT) including Securities Transaction Tax (STT) at Rs. 2,81,013 crore (net of refund).
The provisional figures of Gross collection of Direct Taxes (before adjusting for refunds) for the Financial Year 2024-25 stand at Rs. 5,15,986 crore compared to Rs. 4,22,295 crore in the corresponding period of the preceding financial year, showing a growth of 22.19% over the collections of FY 2023-24.
The Gross collection of Rs. 5,15,986 crore includes Corporation Tax (CIT) at Rs. 2,26,280 crore and Personal Income-tax (PIT) including Securities Transaction Tax (STT) at Rs. 2,88,993 crore. Minor head wise collection comprises Advance Tax of Rs. 1,48,823 crore; Tax Deducted at Source of Rs. 3,24,787 crore; Self-Assessment Tax of Rs. 28,471 crore; Regular Assessment Tax of Rs. 10,920 crore; and Tax under other minor heads of Rs. 2,985 crore.
Provisional figures of total Advance Tax collections for Financial Year 2024-25 (as on 17-6-2024) stand at Rs. 1,48,823 crore, against Advance Tax collections of Rs. 1,16,875 crore for the corresponding period of the immediately preceding Financial Year (i.e. FY 2023-24), showing a growth of 27.34%. The Advance Tax collection of Rs. 1,48,823 crore comprises Corporation Tax (CIT) at Rs. 1,14,353 crore and Personal Income-tax (PIT) at Rs. 34,470 crore.
Refunds amounting to Rs. 53,322 crore have also been issued in the FY 2024-25 till 17-6-2024, which are 33.70% higher than refunds issued during the same period in the preceding year.
PRESS RELEASE, DATED 18-6-2024
Notification: The Indian government introduced a new Digital Services Tax (DST) effective from May 1, 2024.
Brief: The DST is a 2% tax on the revenue generated by large multinational digital companies operating in India. The tax applies to companies with a revenue threshold of INR 20 crores or more from digital services in India. This move aims to ensure that digital economy giants contribute fairly to the Indian economy. The DST is expected to generate significant revenue for the government and level the playing field for local businesses.
Notification: On June 10, 2024, the Finance Ministry announced a reduction in corporate tax rates for new manufacturing units.
Brief: New manufacturing companies incorporated after June 1, 2024, will be subject to a reduced corporate tax rate of 15%, provided they commence production by March 31, 2025. This initiative is part of the government’s efforts to boost industrial growth and attract foreign direct investment (FDI) into the manufacturing sector. The reduced tax rate is expected to make India a more competitive destination for manufacturing investments.
The due date for the issue of a TDS certificate for tax deducted under Section 194-IA/194-IB/194M/194S is May, 2024.
Quarterly statement of TCS deposited for the quarter ending June 30, 2024
