Mazars Tax Update | Edition 38.20

DIRECT TAX NEWS

Faceless Income Tax appeals reducing taxpayers opting for Vivad Se Vishwas scheme

The Vivad Se Vishwas scheme, announced in the Union Budget on 1 February, allows for waiver of interest, penalty, and prosecution for settling tax disputes due up to January 31, 2020, on payment of 100 per cent of the disputed tax and 25 per cent of the disputed penalty or interest or fee.

While the declarations under the scheme have to be filed by December 31, 2020, the government, extended the deadline for making payment till March 31, 2021, in view of the Covid-19 pandemic.
With the appeals process going faceless from September onwards, there are no jurisdictions for the Commissioner of I-T (Appeals), or CIT(A), to approve the withdrawal request.
A government official said that Several CIT(A)s is getting requests for withdrawal of cases, but they no longer hold any jurisdiction. Moreover, the cases have not yet been allocated under the faceless appeals regime. Hence, the CBDT is working on a clarification.
The department is now looking for releasing a clarification asking appellants to upload withdrawal request letters on the national faceless appeals system.
In the guidance, assessees may be asked to declare under the window by the 31st December, with a withdrawal letter, while the process may continue thereafter, given the payment deadline extension until March 31. The details are, however, still being worked out.

CBDT issues clarification on TDS from Salaries during FY 2020-21

Circular No 20/ 2020 dated 03/12/2020

The CBDT issued a detailed clarification on the Tax Deduction at Source (“TDS”) from salaries during Financial Year (FY) 2020-21 under Section 192 of the Income-tax Act. The said circular contains TDS rates applicable on payment of salary for the FY 2020-21 and explains certain related provisions of the Act and Income-tax Rules, 1962. The circular further elaborated method of tax calculation, payment of tax on perquisites by employer, computation of average Income-tax and various other issues.

JUDICIAL PRONOUNCEMENTS

ITAT Mumbai held that a PCIT cannot form different view on same issue if an assessment order is already passed

ITA No. 3473/Mum/2019 dated 08/12/2020

The Income Tax Appellate Tribunal (“ITAT”), Mumbai Bench held that the Principal Commissioner of Income Tax (“PCIT”) cannot form another view on the same issue in which the Assessing Officer (“AO”) has already satisfied himself and passed an order, which clearly indicates that the AO has verified and investigated the matter in detail.
The PCIT had held that the assessee, Bank of India had claimed excess bad debts under section 36(1)(vii) of Rs. 2,619.63 crores without reducing the opening credit balance of Rs. 2,078.70 crores, that is the amount of deduction allowed under section 36(1)(viia) in the preceding year and the same was wrongly allowed by the Assessing Officer.
The PCIT further proceeded to hold that the actual deduction allowable under section 36(1)(vii) works out to Rs. 540.93 crores. Accordingly, he directed that the assessment order passed by the assessing officer is erroneous and prejudicial to the interest of the revenue and directed the assessing officer to restrict the addition under section 36(1)(vii) and determine the total income accordingly.
The ITAT noted that the assessee had filed detailed submissions and the assessing officer had considered the submissions and had satisfied himself that assessee is eligible to claim deduction under Section 36(1)(vii) and 36(1)(viia) of the Act.
Therefore, the court held that the PCIT cannot form another view on the same issue in which the assessing officer has already satisfied himself and passed an order which clearly indicates that the assessing officer has verified and investigated the matter in detail. Therefore, the revisionary powers under section 263 of the Act cannot be invoked.

Advertisement expenses incurred by Himalaya Drug Company for construction of swimming pool in school cannot be allowed

IT(TP)A No. 3071/Bang/2018 dated 07/12/2020

The ITAT, Bangalore held that the payment of Rs. 99.66 lakhs incurred by Himalaya Drug Company towards construction of a swimming pool in the school namely M/s Mallya Aditi International School is not a deductible advertisement expenditure.
The assessee company claimed that its name would appear at the swimming pool of the school where 500 students study and is also visited by their parents. The assessing officer noticed that the children of the promoters were studying in the abovesaid school. Thus, the said swimming pool construction expenditure was personal in nature and there was no commercial consideration involved.
It was held that the expenditure is personal in nature and cannot be allowed as a business expense.