Mazars Tax Update | Edition 29.20

DIRECT TAX NEWS

Over 35,000 disputed cases resolved under Vivad Se Vishwas Scheme, 2020

As of 8^th September 2020, over 35,000 direct tax related disputes were resolved under the Vivad Se Vishwas Scheme. Vivad Se Vishwas Scheme is applicable to taxpayers who have filed appeals for resolving disputed tax, interest or penalty matters with the Commissioner (Appeals), Income-tax Appellate Tribunal, High Court and Supreme Court as on the 31^st January 2020.

CBDT deployed two third of its workforce to deal with faceless assessment scheme

In order to streamline Faceless I-T Assessments CBDT has deployed over two third of its manpower. Phase 1 of the scheme was inaugurated on 7^th October 2019 with 58,320 case assigned to it. Now, the the National e-Assessment Centre (“NeAC”) which is headed by Principal Chief Commissioner of Income Tax has a team of 32 Commissioners, 96 Principal Commissioners, 261 Assistant and Deputy Commissioners and 1274 Income Tax Officers. The ReAC have also been increased earlier from 8 to 34.
Under the Faceless Assessment Scheme, all cases other than those assigned to the Central charges (Serious frauds, Major Tax Evasion, Sensitive and Search matters, Black Money and Benami cases) and International Tax charges to be done through faceless assessment. 

Parliamentary panel recommends abolition of LTCG in Start-up sector

Parliamentary Committee in Finance headed by BJP MP Jayant Sinha recommended for abolition of LTCG on investments made through collective investment vehicles such as angel funds, alternate investment funds and investment LLPs in Start-ups to encourage investments in start-ups sector, which will also drive a sharp post-pandemic revival of start-ups sector.
 
Start-up sector welcomed the recommendation of abolishing LTCG as this would open the floodgates of domestic capital inflow into this sector. Committee also recommended that exemption of income from investments made before 31^st March 2024 subject to investments being held for more than 36 months be provided to long-term and patient capital invested across all sectors. The committee also suggested that  LLPs and Companies should be allowed to invest in start-ups without being classified as non-banking financial Companies by the Reserve Bank of India (RBI) to expand capital sources for start-ups.

JUDICIAL PRONOUNCEMENTS

Jaipur Bench of ITAT held that unaccounted income disclosed and owned up by one person before Income Tax Settlement Commission (“ITSC”) cannot be taxed in the hands of another person

DCIT v/s Shri. Jugal Kishore Garg (Derewala) ITA NO. 34, 35, 36 & 37/JP/2020 dated 21 September 2020

I-T Search and seizure was carried out on Manglam Group, Jaipur, subsequent to which notice under section  153C of I-T Act was issued to taxpayer. Assessment was completed by making additions based on the Cloud Data namely “N Trading” which was already disclosed and owned before ITSC by the Mangalam Group. The ITAT confirmed the order of CIT(A) stating that such transaction are already subject to tax in the hands of Mangalam Group and cannot be taxed again.

Karnataka HC held that benefit of indexation on LTCG is available while computing MAT and allowed deduction of interest paid to creditors/lenders against interest income.

Best Trading and Agencies Ltd v/s DCIT ITA No. 191/2011 & 32/2012 dated 26/08/2020

The taxpayer is a SPV for the financial restructuring of Kirloskar Electric Company Ltd. under the scheme approved by the court. The taxpayer earned interest from fixed deposits against which interest was paid to lenders and creditors and was claimed as deduction under section 57 of I-T Act. Further, the taxpayer had declared a long-term capital loss from the sale of the capital asset.

 
The HC held there is no provision under the existing income tax law which prevents the taxpayer from claiming the indexed cost of acquisition on sale of the capital asset where he is subject to MAT. It was further held that there is a close nexus between the interest earned on the fixed deposits and the interest paid to the lenders and the creditors and allowed the appeal of the assessee with regard to claim of deduction under Section 57 of the I-T Act.