Mazars Tax Update | Edition 36.20

DIRECT TAX NEWS

LTC Cash Voucher Scheme extended to Non-Central Government Employees

OM No F. No 12(2)/2020-EII (A) dated 12th October 2020

The Government of India had recently allowed payment of cash equivalent of Leave Travel Concession (“LTC”) fare to Central Government employees subject to the fulfilment of certain conditions. The scheme was announced with a view to compensate Central Government employees and to incentivize consumption, thereby giving a boost to consumption expenditure to combat the effects of Covid-19 pandemic to the economy. It has also been provided that since the cash allowance of LTC fare is in lieu of deemed actual travel, the same shall be eligible for income-tax exemption on the lines of existing income-tax exemption available for LTC fare.   
In order to provide the benefits to other employees (i.e. non-Central Government employees) who are not covered by the above mentioned office manual, it is now decided to provide similar income-tax exemption for the payment of cash equivalent of LTC fare to the non-Central Government employees also. Accordingly, the payment of cash allowance, subject to a maximum of Rs 36,000 per person as Deemed LTC fare per person (Round Trip) to non-Central Government employees, shall be allowed as income-tax exemption subject to fulfilment of following conditions:

1. The employee exercises an option for the deemed LTC fare in lieu of the applicable LTC in the block year 2018-2021.
2. The employee spends a sum equals to three times of the value of the deemed LTC fare on purchase of goods/ services which carry a GST rate of not less than 12% from GST registered vendors/ service providers (‘the specified expenditure’) through digital mode during the period from the 12^th October, 2020 to 31^st March, 2021 (‘specified period’) and obtains a voucher indicating the GST number and the amount of GST paid.
3. An employee who spends less than three times of the deemed LTC fare on specified expenditure during the specified period shall not be entitled to receive full amount of deemed LTC fare and the related income-tax exemption and the amount of both shall be reduced proportionately.

It is also stated that this exemption will not be available to person who has exercised to pay income tax under concessional tax regime under section 115BAC of the Income-tax Act, 1961.

JUDICIAL PRONOUNCEMENTS

Bombay High Court held that even though res-integra is alien to tax jurisprudence, the revenue shall follow law of the case

Bombay High Court (Goa Bench) in CIT vs. V. M. Salgaonkar Brothers Pvt Ltd vide Tax Appeal No. 72/2015 dated 13th October 2020

The Hon’ble Court held that the doctrine of law of the case implies that once an appellate court decides an issue, then it stands settled in further proceedings in the same case. The doctrine wants the courts to “display disciplined self-consistency” throughout the case. Even if res-integra is alien to tax jurisprudence the doctrine of law of the case applies. The law of the case fetters a later Bench in the same case from taking a contrary stand to that taken earlier by the previous Bench. Of course, this constraint flows down to the lower judicial echelons or applies to coordinate Benches, but not appellate or higher fora. 

Jewellery found in past search can be taken as valid basis for explaining jewellery found in second search

Shalini Chawla v. ACIT (ITA no. 8004/del./2019) dated 27.08.2020 – Delhi tribunal
The brief facts of the case are that the assessee was searched by the Income-tax department in the year 2007 wherein some jewellery was seized and valued. Further, in the year 2016, second search took place on the assessee and jewellery was again found. The assessing officer made addition on the ground that jewellery found in the second search is different from that found in the first search.
The Delhi ITAT held that the jewellery found and valued in the first search in year 2007 can be taken as valid basis and threshold to compare and jewellery found in the second search. Further, change in shape or size of jewellery is immaterial as long as gross weight is comparable. It was also held that where the weight of jewellery found in the second search was less that of in the first search no addition can be called for.