Questions & Answers
CA. H.N. Motiwalla


Query No. 1 : Penalty under Section 271(1)(c) when assessed under S. 115JB

Whether penalty under section 271(1)(c) of the Act can be levied in a case where tax has been paid by the assessee under section 115JB of the Act and amount of tax payable as book profit is the same even as per order of assessment, with reference to variation in the amount of loss or income determined as per normal provisions of the Income-tax Act?


In CIT v. Nalwa Sons Investments Ltd., [327 ITR 543 (Del.)] the facts were the assessee filed return declaring loss of Rs. 43.47 crores. Thereafter, the revised return exhibiting the income at Rs. 3.87 crores were filed under provisions of section 115JB of the Income-tax 1961. The assessment was framed under section 143(3) at loss of
Rs. 36.95 crores, after making certain additions as per normal provisions and book profit at Rs.
4.07 crores under section 115JB of the Act.

The Court observed that under the scheme of the Act, the total income of the assessee is first computed under the normal provisions of the Act and tax payable on such total income is less than certain percentage of book profit, then, such book profit shall be deemed to be the total income and tax shall be payable on such deemed income.

Further, the Court has also noted that the Explanation 4 to section 271(1)(c ) of the Act, which gives the meaning of the term “the amount of tax sought to be evaded”. That is where the income in respect of which particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or converting that loss into positive income, the tax sought to be evaded shall be the tax that would have been chargeable on the amount of such income if it were the total income.

After considering the scheme as well as Explanation 4 to section 271(1)(c ) of the Act the Delhi High Court held that, no doubt there was concealment but that had its repercussions only when the assessment was done under the normal procedure. In the instant case, the assessment as per normal procedure was, not acted upon. On the contrary, it is deemed income assessed under section 115JB of the Act which became the basis of assessment. Tax is paid on the income assessed under section 115JB of the Act. Hence, when the computation was made under section 115JB of the Act, the aforesaid concealment had no role to play and was totally irrelevant. Therefore, the concealment did not lead to tax evasion at all. Therefore, penalty cannot be imposed on the basis of disallowance or addition made under normal provisions.

Query No. 2 : Section 50C – Stamp Duty value exceeds the actual consideration

X purchased a vacant site (2400 sft) of rural area of Andhra Pradesh for Rs. 10,000/- in the financial year 1995-96 and paid Stamp Duty as per above consideration. Now X wants to sell it to Y for
Rs. 2,00,000/- i.e. actual consideration. But Stamp Duty has to pay for Rs. 16,00,000 i.e reckoner
value of
16,00,000/-. What steps X and Y should take?


Section 50C(1) if the Act provides that in case where the value adopted or assessed by the stamp valuation authority in respect of a transfer of land or building or both for the purpose of payment of stamp duty exceeds the consideration received or accrued by the assessee for such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration received or accruing for such transfer.

Section 50C(2), provides for the valuation of the capital asset to be referred to a valuation officer where the assessee claims that the value adopted by the stamp authority is in excess of the fair market value of the property. The valuation of the capital asset cannot, however, be referred to a valuation officer where the value adopted or assessed by the stamp authority has been disputed in appeal or revision or in
reference before any authority, Court or the High Court.

So, in this case, Y has to challenge the value adopted or assessed by the stamp authority in appeal or revision or in reference before any authority, Court or High Court.

If Y does not dispute the said valuation before any authority or Court or High Court then, X can claim before the Assessing Officer that the value so adopted or assessable by stamp duty authority is in excess of fair market value of the property as on date of transfer, be referred to the valuation officer.

Query No. 3 : Applicability of TDS
u/s. 195

X purchased a vacant site in Andhra Pradesh from Y (Non-Resident) for sale consideration of Rs. 25,00,000/-, in the Financial Year 2010-11, without deducting TDS. Whether section 195
of the Income-tax Act, 1961 would be


The objective of this section is to ensure that the tax on the income of non-residents and foreign companies is deducted at source, so that the department is not put to the trouble of recovering it from such persons whose connections with India, may be transient or whose assets in India, may not be sufficient to meet the tax liability.

If income is chargeable in the hands of Y (non-resident) tax has to be deducted as per the provisions of section 195 of the Act. The Supreme Court in GE India Technology Centre Pvt. Ltd. v. VIT [327 ITR 456] has held that the obligation to deduct tax at source arises only when there is a sum chargeable under the Act i.e. payment which has an element of “income” chargeable to tax in India.

However from July 1, 2012 sub-section (7) has been inserted in section 195 to provide that a person responsible for paying a non-resident in relation to a specified class of persons or cases which are notified by the Board shall make an application to the Assessing Officer to determine whether tax is to be deducted or not.

Query No. 4 : Can Jain being of minority community continue in the status of HUF?

As per F. No. 4-2/2014 –NCM., G.O.I. Ministry of Minority Affairs, dated February 6, 2014, Jain Community are covered under section 2(c ) of National Commission of Minority Act 1992 as minority. So, can Jain continue with HUF under the Income-tax Act?


There is no restriction on Jains to be assessed under the status of “HUF” under the Direct Tax laws, even though Jain community has been declared as a minority community.

No separate definition of the expression HUF has been attempted in any of the Direct Tax laws because the term has a definite connotation under the Hindu Law. The Supreme Court in Surjit Lal Chhabda v. CIT [101 ITR 776] and the Bombay High Court in CIT v. Gomedalli Lakshmi Narayan [3 ITR 367] have declared that the expression HUF must be construed in the
sense in which it is understood under the Hindu Law.

Mulla, in his seminal work on Hindu Law, stated that the Hindu Law applied to the following:

(i)        Hindus, not only by birth but Hindus by conversion;

(ii)       Illegitimate children where both parents are Hindus;

(iii)     Illegitimate children where father is Christian and mother a Hindu and if children are brought up as Hindus;

(iv)      Jains, Buddhists in India, Sikhs, Nambudri Brahmins except so far as such law is varied by custom and to Lingayats;

(v)       A Hindu by birth who having renounced Hindusism has reverted to it;

(vi)      Sons of Hindu dancing girls;

(vii)    Brahmos, Arya Samajists, and Santhals of Chhota Nagpur;

(viii)   Hindus who make a declaration that they are Hindus for the purpose of Special Marriage Act;

(ix)      Kutchi Memons who had settled in Madras and Travancore, etc., and regulated their affairs according to Hindu law in matters of succession, inheritance and property including the Hindu concept of coparcenary and survivorship. Therefore, accordingly to CED v. Hajee Abdul Sattar Sait [(86 ITR 53 (SC)] such Kutchi Memons being mass converts were governed in matters of property, succession and inheritance by the rules of Hindu law including the rules as to joint family property, its distribution according to the rule of survivorship and the right of a son by birth.

Query No. 5 : Assessment on Executors

Please explain the procedure for e-filing of return of a deceased’s estate till final distribution of assets i.e. maturity of Section 54EC Bonds, Tax Saving FDR., P.O. deposits etc., (section 168 (1)(a). Whether he will have to apply for separate PAN or PAN of deceased will serve the purpose. The basic exemption will also be available for
Rs. 2,00,000/- or not applicable to deceased?


Section 168 of the Act applies to executors as well as to administrators or other
person administrating the estate of a deceased person.

Sections 159 and 168 of the Act deal with assessments on legal representatives. Section 159 of the Act is meant to enable the revenue to make an assessment on legal representation in respect of the income which accrued to or was received by the deceased, while section 168 of the Act authorises an assessment on the legal representative in respect of the income which accrues to him after the death, the estate being vested in him. Though the assessment is on the executor or executors, as the case may be, for all practical purposes it is the assessment of the deceased [CIT v. G.B.T. Sheth and Another – 133 ITR 192 (MP)].

Hence, the executor has to e-file return under the PAN of the deceased and would be entitled for basic exemption.